Net profit margin

Net profit margin Return on assets Return on equity... 

Since an inherent goal of any business is to be profitable, we can view profitability ratios as measures of overall success in the daily operations of a business. More specifically, profitability ratios provide a method to measure the overall financial success of a company. Examining profitability ratios allows managers to assess the company s level of success in generating profits. The most commonly used profitability ratios are the gross profit margin and the net profit margin. 

Net profit margin = net income (after taxes) -=-total sales... 

Net profit margin indicates the fraction of net profit that is generated for every dollar of sales. As mentioned earlier, as a profitability ratio, it could be used to determine how well the organization manages its operating expenses. It could also be used to compare the performance of two or more pharmacies within a chain or to assess the performance of a pharmacy against industry averages. 

Net profit margin A profitability ratio that indicates the fraction of net profit generated for every dollar of sales. It is calculated by dividing net income after taxes by total sales. 

Finally, net profit is the bottom line. After all costs, expenses, interest, and taxes have been deducted from revenue the net profit remains. Typically, when profit margin is specified, it refers to net profit margin. Use net income (net profit, net earnings) in the ratio calculation. 

The profit margin on sales, also called return on sales or net profit margin, is an important foundational concept. Looking at the equation, remember that net income (in the numerator) is also knovm as profit or net earnings. Sales revenue is the denominator however, revenue or sales could be used instead. 

With the revised DuPont model, notice that ROA is 2.03% and ROE is 4.65%, both of which are improvements over the current distribution network. Furthermore, EBIT and net profit margin both improve (Table 8.10). While fixed asset turnover declined slightly, the overall improvements outweigh any slight decline in this ratio. Moreover, since earnings per share (EPS) is important to Wall Street and executives alike, seeing that EPS improves since net profit increased to 8.33M and provided the number of shares has not increased. However, if the company increased the number of shares to raise capital for this project instead of using their own cash, then EPS may decline. 

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