How Do You Work Out Net Profit Ratio

How Do You Work Out Net Profit Ratio Net Profit Margin Net Profit Revenue 80 225 35 56 Company ABC has a higher net profit margin Calculation Example 2 Company A and company B have net profit margins of 12 and 15 respectively Both companies earned 150 in revenue How much net profit did each company make Step 1 Write out formula Net Profit Margin Net Profit

Net Profit Ratio Definition The net profit ratio also known as net profit margin is the net profit after tax as a percentage of net sales Net Profit Ratio Formula The formula to calculate the net profit NP ratio is Both the components in this formula net profit and net sales are usually found in the trading and profit and loss account or income statement The net profit margin calculator allows you to work out a simple and intuitive measure of a company s profitability in relation to its total revenues It s a straightforward way to determine how large the profit generated by a single dollar of sales is Learn more about this in our retained earnings calculator Business owners investors and

How Do You Work Out Net Profit Ratio

How Do You Work Out Net Profit Ratio
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The net profit margin is calculated by taking the ratio of net income to revenue The net profit margin is calculated as follows 4 350 6 400 0 68 100 68 Profit Margin Formula Net Profit Margin Net Profit Revenue Where Net Profit Revenue Cost Profit percentage is similar to markup percentage when you calculate gross margin This is the percentage of the cost that you get as profit on top of the cost Profit Percentage Net Profit Cost Revenue Selling Price

The formula is Net Profit Ratio Net Profit Net Sales x 100 However to find this out we need to find out the net sales of the company The formula for this is Net Sales Sales Returns 10 00 000 5 00 000 Rs 5 00 000 Next is finding out Net Profit the formula for which is Net Profit Operating Profit Direct Cost Let s say your business makes 20 000 by cleaning offices It costs you 8000 to provide those services And you spent another 7000 on operating expenses and taxes Here s how to work out your net profit margin

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Step 2 Calculate Net Profit Margin Ratio NPMR Net Profit Margin Ratio Net Profit Revenue 100 Substitute the values NPMR 130 000 800 000 100 Simplify the calculation NPMR 0 1625 100 Final result Net Profit Margin Ratio 16 25 With a 16 25 margin your boutique is performing well for retail The net profit margin ratio equation will help us quantify the magnitude of profitability of the company Each company s NPM is calculated like this As we can see both Company X and Company Y have the same NPM even though Company Y is 10 times bigger Also Company Z and Company X have the same net income but their margins differ drastically

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How Do You Work Out Net Profit Ratio - Let s say your business makes 20 000 by cleaning offices It costs you 8000 to provide those services And you spent another 7000 on operating expenses and taxes Here s how to work out your net profit margin