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Another main purpose of the Net Profit Margin is to control company Operating Expenses.
Net profit ratio analysis interpretation. Net profit margin also called net profit ratio or simply profit margin determines net profit generated by each dollar of revenue earned during the period. Net profit NP ratio Posted in. The net profit margin is a ratio formula that compares a businesss profits to its total expenses.
Was the gross profit to sales percentage last year better or worse. The ratio rather than looking at the return on investment or funds employed looks at how much of a firms sales are retained. Net profit margin is used to compare profitability of competitors in the same industry.
The higher the net profit margin the more money a company keeps. Net Profit Margin interpretation. Net profit margin often referred to simply as profit margin or the bottom line is a ratio that investors use to compare the profitability of companies within the same sector.
Net profit margin analysis is not the same as gross profit margin. Net Profit Margin Definition The net profit margin also known as net margin indicates how much net income a company makes with total sales achieved. You must also be sure which profit has been used to calculate the ratios.
Profitability ratios are financial metrics used by analysts and investors to measure and evaluate the ability of a company to generate income profit relative to revenue balance sheet assets operating costs and shareholders equity during a specific period of time. Profit Margin after taxes Profit Margin is a ratio which measures the amount of profit after the deduction of all the expenses and income taxes per 1 dollar of sales. A further ratio that can be used in determining the profitability of the firm is the net profit ratio NPR.
Formula for ROE is shown below. Profit Margin Net Income After Taxes Net Sales. Higher net profit margin indicates that entity was able to cover all of its expenses and still left with portion of revenue which is in excess of total expenses.
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