One of the key performance indicators (KPIs) used by investors to evaluate the performance of a particular company is the net profit margin. The formula shows how much of a company’s sales result in profit and how much is lost through, for example, depreciation or tax. Additionally, the calculation can also provide companies with the information needed for determining the effectiveness of cost control measures within their organisation. A comparatively high profit margin can be very advantageous for a business, by providing a cushion to protect the company when markets contract. Equally, a company with a relatively low net profit margin may well be faced with a higher than average risk in the event of a downturn.