ACCOUNTING TERMS - ACCOUNTING DICTIONARY - ACCOUNTING GLOSSARY
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GENERAL AVERAGE Definition
GENERAL AVERAGE is the provision in maritime law where all shippers on a given voyage would reimburse the ship line in the event of vessel sinking or catastrophic damage. It also provides for the reimbursement to those shippers whose cargo was thrown overboard in order to save the vessel.
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ACKNOWLEDGEMENT OF INDEBTEDNESS is a written recognition of debt that is enforceable in law, e.g. memorandum check, bank draft, or loan contract.
NET PROFIT MARGIN (NPM After Tax) measures profitability as a percentage of revenues after consideration of all revenue and expense, including interest expenses, non-operating items, and income taxes. For a business to be viable in the long term profits must be generated; making the net profit margin ratio one of the key performance indicators for any business. It is important to analyze the ratio over time. A variation in the ratio from year-to-year may be due to abnormal conditions or expenses which need to be addressed. A decline in the ratio over time may indicate a margin squeeze suggesting that productivity improvements may need to be initiated. In some cases, the costs of such improvements may lead to a further drop in the ratio or even losses before increased profitability is achieved. Generally, if the NPM history is >20% annually, it is an indicator that the firm enjoys a sustainable competitive advantage. If the average NPM is <10%, it usually indicates that the firm is in a highly competitive business. Formula: Net Profit After Tax (EAT + DII + OI) / Net Revenue
