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2 Interpretation Here the results of analysis are used to judge a business performanceThis is done by making comparisons a with other similar businesses usually within the same year eg.
Net profit margin ratio analysis interpretation. Net profit margin also called profit margin is the most basic profitability ratio that measures the percentage of net income of an entity to its net sales. Interpretation Analysis The net profit ratio can be viewed as a gauge of both business efficiency and profitability. The net profit margin or simply net margin measures how much net income or profit is generated as a percentage of revenue.
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. A low profit margin indicates a low margin of safety. To interpret the numbers in these three reports it is essential for the reader to use financial ratios.
These ratios are calculated using numbers taken from a companys balance sheet profit loss ac and cash flow statements. Net profit margin also known as return on sales is a profitability ratio that measures the percentage of net income to sales. Net profit margin analysis is not the same as gross profit margin.
You must also be sure which profit has been used to calculate the ratios. It represents the proportion of sales that is left over after all relevant expenses have been adjusted. Net profit margin formula is.
The net profit margin also known as net margin indicates how much net income a company makes with total sales achieved. The percentage of gross profit to sales or the working capital ratio. Net profit margin NPM or Return on sales ROS a measure of a companys ability to generate income it shows how much.
If a company has a 20 net profit margin for example that means that it keeps 020 for every 1 in sales revenue. Net profit margin is used to compare profitability of competitors in the same industry. The net profit margin is a ratio that compares a companys profits to the total amount of money it brings in.
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