Analysts use performance indicators to establish the effectiveness of a company. Profits are one of the primary indicators used by analysts to ascertain a company's performance. In order for a company to have long-term success and survive as a business, the company must eventually have profits. Net profit margin is one of the key indicators used to evaluate a company's performance as this margin calculates a company's net income as a percentage of the company's sales. Several factors directly contribute to the change in a company's net profit margin. A high net profit margin shows that a company can convert sales into profits. The net profit margin also considers all of the costs associated with the sale of the products.