What is the Net Profit Margin Ratio?

Question: What is the net profit margin ratio?
Answer:
net profit margin ratio is the ratio of the margin of profitability indicators. It can be calculated by using off the company's profit (loss) statement. Net profit margin dollars of profit a company generates sales per dollar. If the company generates $ 1.00 of sales revenue, for example, and 5 percent net profit margin, which means that she gave birth to 5 cents profit.

Net profit margin ratio = Net Profit / Net Sales = ________%

Net sales are just as in any returns and allowances are deducted from sales revenue. Net profit for all expenses, including taxes, interest and depreciation expenses deducted from income. This is the "bottom line".

As the company's net profit margin ratio

Net Profit Margin Ratio

Net profit margin indicates how well the conversion to a profit after selling all expenses are deducted. As industry is so diverse, the net profit margin is not very good compared to companies of different industries. It is good, but compared to the same industry, if you want to look for the bottom line.

It is also a good time-series analysis tool by which business owners can look at the details of your company in a different time to see how the net profit margin is a trend. Financial indicators are useful only when used for comparative analysis.

Companies, which more profits, selling for a dollar is better. If you look at the net profit margin ratio, you will see that the numerator (net income) affect the company's actions to reduce costs, and the denominator (net sales) impact on company activities to increase sales revenue. These steps will increase the net profit margin ratio.

Sources :
http://www4.agr.gc.ca/AAFC-AAC/display-afficher.do?id=1228246364385&lang=eng
http://bizfinance.about.com/od/financialratios/f/Net_Profit_Margin.htm
http://www.smallbusiness.wa.gov.au/net-profit-margin-ratio/