The Net Profit Margin is also expressed as a percentage
of sales. Again, the higher the percentage, the more profitable
the business. We expect the Net Profit Margin to be lower than
the gross profit margin because it includes more costs.
For our example, the calculation is:
You can see that the answer is negative - the
business was making a loss. In this case, for every pound coming
in from sales, the business was paying out £1.09 in costs
(direct and indirect). Not a great position to be in.