Net profit margin
Net profit margin is a ratio that compares a company’s net income with its operating revenue. Statistics Canada calculates it as the ratio of net income to operating revenue, so it shows net income relative to operating revenue.
Statistics Canada defines net profit margin as the ratio of net income to operating revenue. BDC says it reveals the amount of profit a business is taking in, and that it will be key to a business that wants to grow and raise capital. Net income itself appears on the income statement. See what buyers look for in your financial statements.
How it differs from other margins
Innovation, Science and Economic Development Canada describes gross margin as sales of goods and services less costs of sales, set against those sales. Net profit margin starts from net income instead. Statistics Canada also publishes an operating margin and a pre-tax profit margin, so the name alone does not fix which profit line a figure rests on. Compare with gross margin and EBITDA margin.
What to check or ask
- Which net income figure the seller used, and whether it is after tax
- Whether one-time or personal items affect the year being quoted
- How the margin compares with an industry figure (see financial performance data)
Sources
This definition is checked against primary sources. Links were last confirmed on the dates shown.
- 01Statistics CanadaResearch dataMethodology used to create enterprise size and financial ratios
- 02Business Development Bank of CanadaGovernment4 types of financial ratios to assess your business performance
- 03Innovation, Science and Economic Development CanadaGovernmentGlossary - Financial Performance Data
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