Net profit ratio indicates the relationship between net profit and net sales. Net profit can be either operating net profit or net profit after tax or net profit before tax. Alternatively, this ratio is also known as “Margin on sales ratio". Normally this ratio is calculated & expressed in Percentage. It measures overall profitability of the business. It is very useful in judging return on investments. It provides useful inferences as to the efficiency and profitability of the business. It indicates the portion of net sales is available for proprietors. It is a clear index of cost control, managerial efficiency, sales promotion, etc..
Formula:
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