);

Net Profit Margin

Net Profit Margin describes the amount of value generated by a business within a period after all direct cost of sales, general overheads/expenses, and financing costs are considered. Net profit does not necessarily indicate the positive levels of cash generated by a business. However, it is a reliable time-based measure for gaining an understanding into the overall value that the business is providing to its stakeholders. Jazoodle uses the derived Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) figure for its net profit margin calculations. This helps dilute the effect of accounting choices on core performance. If you find your net profit margins changing, this either will be because of a change in your gross margins (see above) or equally, that your general expenses, wages or other non-direct costs are changing. If net margins are reducing, check one of the other measures such as COGS: EBITDA (to check direct cost of sales costs), or Expenses:EBITDA (to check general expenses trends).Note – if both of the COGS:EBITDA and EXPENSES:EBITDA measures are stable, then there may not be a problem at all – and could be accounted for by an increase in depreciation following an asset purchase. Check this out by assessing the Expenses:Net Profit measure

Spread the word. Share this post!