FBLA Business Calculations Practice Test 2025 – Complete Study Resource

To calculate the net profit margin, the correct formula involves dividing net profit by revenue and then multiplying that result by 100 to express it as a percentage. This formula is essential because it shows how much profit a company makes for every dollar of revenue generated. By using net profit in the numerator, you focus on the actual profit remaining after all expenses, taxes, and costs have been deducted from total revenue, providing a clear picture of a company's profitability.

This calculation is vital for assessing financial health and efficiency, as it allows stakeholders to gauge how effectively a company is converting revenue into actual profit. A higher net profit margin indicates better profitability compared to competitors and a stronger ability to withstand financial challenges. Understanding this metric can guide decision-making in areas such as pricing strategies and cost management.