net profit margin

• What does the net profit margin represent?

  It shows the proportion of revenue that remains as profit after all costs have been deducted.
• Why is the net profit margin important for businesses?

  It provides a comprehensive view of overall profitability.
• What does a high net profit margin indicate?

  It indicates effective cost management and overall business efficiency.
• How can businesses use net profit margin for assessment?

  They use it to assess their financial health and compare profitability across periods or against competitors.
• What are the implications of a high net profit margin for a business?

  • Effective cost management
  • Overall business efficiency
  • Higher profit earned from each unit of revenue
• Net Profit Margin = Net Profit / Sales Revenue x 100
• Improving Net Profit Margin

  1. Improving gross profit
  2. Reducing fixed running costs

  Methods of reducing fixed costs could include:

  • Changing location to somewhere cheaper
  • Cutting back on any ineffective promotional activity
  • Cutting back on the number of managers
  • Cutting back on management salaries or bonuses