NET PROFIT MARGIN (NPM After Tax) Definition

Bookmark and Share

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

Learn new Accounting Terms

REGULATORY ASSETS are those assets under control of a government entity, normally a utility, controlling access to the asset base as well as ascribing fees for gaining access to the use of the regulatory asset base being regulated.

OVERSIGHT, in management, is overseeing the performance or operation of a person or group; or, generally, an unintentional omission resulting from failure to notice something.

Suggest a Term

Enter Search Term

Enter a term, then click the entry you would like to view.