Profit Margin, Net Margin, Profit Margin Net or Net Profit Ratio is a measure of profitability. It is calculated by finding the net profit as a percentage of revenue.[1]​.

Profit margin is calculated using the sales price (or revenue) taken as a basis times 100. It is the percentage of the sales price that is converted into profit, while "profit percentage" or "profit margin" is the percentage of the cost price that one makes as profit in addition to the cost price. When selling something, one must know what percentage of profit they will get from a particular investment, so companies calculate the profit percentage to find the relationship between profits and costs.

The profit margin is mainly used for internal comparison. It is difficult to accurately compare the net profit ratio for different entities. The operating and financial arrangements of individual companies vary so much that different entities are required to have different levels of spending, so comparing one with another may have little meaning. A low profit margin indicates a low margin of safety: greater risk that a decline in sales will erase profits and result in a net loss, or a negative margin.

Profit margin is an indicator of a company's pricing strategies and how well it controls costs. Differences in competitive strategy and product mix cause the profit margin to vary between different companies.[2]​.

On the other hand, the profit percentage is calculated with the cost price taken as a base.

Suppose something is bought for $50 and sold for $100.

If the revenue is the same as the cost, the profit percentage is 0%. The result above or below 100% can be calculated as the percentage of return on investment. In this example, the return on investment is a 0.5 multiple of the investment, resulting in a 50% profit.