Net/Gross profit margin equals Net Profit divided by Turnover × 100. Which option expresses this calculation correctly?

• A. Turnover ÷ Net Profit × 100
• B. Gross Profit ÷ Turnover × 100
• C. Net Profit ÷ Turnover × 100
• D. Net Profit × Turnover ÷ 100

Answer: (C)

Net profit margin shows how much of each pound of turnover is kept as profit after all expenses. To express this as a percentage, you compare net profit to turnover and then multiply by 100. So the correct form is net profit divided by turnover, then times 100.

For example, if net profit is £40,000 and turnover is £200,000, the margin is (40,000 / 200,000) × 100 = 20%.

Why the others don’t fit: using turnover divided by net profit gives the inverse ratio and isn’t a profit margin; using gross profit instead of net profit measures gross margin, not net margin; multiplying net profit by turnover and then dividing by 100 doesn’t reflect the portion of turnover that becomes profit.