Net_profit_margin_presentation

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Calculating net profit margin ratio for publicly traded and privately held companies. Accouting, investments, and finance.

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Measuring Profitability of a Company – Net Profit Margin: 

Measuring Profitability of a Company – Net Profit Margin Julia Westlake, MAEd , MBA

Profits and Companies: 

Profits and Companies

How do We Measure Profitability?: 

How do We Measure Profitability? Net Profit Margin Return on Assets Return on Equity or Return on Investment

Net Profit Margin: 

Net Profit Margin After cost margin of profits How effectively the company is controlling costs to maximize profits We look for industry appropriate high numbers – they indicate better performance

Net Profit Margin Formula: 

Net Profit Margin Formula Net Profit Margin = Net Profit After Taxes Total Revenues

Where to Find the Info: 

Where to Find the Info

Solve it!: 

Solve it! Step 1: Identify the formula. Net Profit Margin = Net Profit After Taxes ÷ Total Revenues

Solve it! : 

Solve it! Step 2: Fill the formula in with the values. Net Profit Margin = Net Profit After Taxes Total Revenues Net Profit Margin = $5,503,100 $27,006,000

Solve it!: 

Solve it! Step 3: Solve it. Net Profit Margin = $5,503,100 $27,006,000 0.20 or 20%

Solve it!: 

Solve it! Step 4: Figure out what it means. For every $1.00 this company spent, it retains 20% which is 20-cents for profit Company is healthy Compare to another company in the same industry or a competitor to place in perspective Competitor comes in at 0.10 or 10% Means this company is doing an excellent job making profits!

Net Profit Margin: 

Net Profit Margin Measure of profitability Information is found on the Income Statement Net Profit After Taxes ÷ Total Revenues Look for industry appropriate high ratios