Net profit ratio

• Overall


  Income statement

  A figure between 13 - 20% is considered good

  Gives an indication of the level of and trend in expenses

  A low or declining net profit figure could be of concern as it shows that the amount of sales going to the owner is low or falling

  Generally the higher the figure the better but it needs to be considered with the volume of sales and the type of industry

  A falling figure is generally a cause of concern
• Strategies


  to increase the ratio, relates to measures used to reduce expenses. Increase the volume of sales and level of output will compensate for a low or falling Net Profit Ratio