Net profit margin is one of the most important Key Performance Indicators (KPI) in business.

It is calculated as follows:  Net profit / Revenue x 100.

Net profit margin is expressed as percentage and tells you out of each dollar how much of it goes towards your profit.

The Net profit margin is a great indicator of:
1.    How efficient the business is;
2.    How well it controls it costs; and
3.    Does it properly price its products / services properly.

Calculating the Net profit margin is usually straight forward as profit and loss statements can usually be generated from all accounting software. 

However, the following adjustments may need to be considered:
1.    Depreciation and amortization;
2.    Closing stock;
3.    Work in progress; and
4.    Provisions for annual leave and Long service leave.

Other information:
Other KPI

If you would like to discuss further please contact us:
McNamara and Co - Chartered Accountants, located minutes from the Melbourne CBD
www.mcnamaraandcompany.com.au/contact-us
Phone +61 3 9428 1062
Email admin@mcnamaraandco.com

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