NET PROFIT MARGIN (NPM Pre-Tax) incorporates all of the expenses associated with ordinary business (excluding taxes) thus is a measure of the overall operating efficiency of the firm prior to any tax considerations which may mask performance. 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. Formula: Net Earnings / Net Revenue
LIMIT TEST is a computer program step that compares data with predetermined limits as a reasonableness test, e.g. number of hours worked over 40 per week.
TRADE EXCHANGE is a barter system where people or companies trade goods and services without the use of money. In the U.S., income from barter transactions is considered taxable.
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