Net Profit Margin

The net profit margin measures the percentage of each sales dollar remaining after all expenses, including taxes, have been deducted. It is calculated as follows:

Net profit margin = Net income after taxes
Sales

For Jimco's the net income margin for 1993 is:

$6,580,000 = .129, or 12.9%
$51,000,000

industry average = 16.13%

Return On Investment (roi)

The return on investment (ROI), measures the overall effectiveness of management in generating profits with its available assets.

Return on investment = Net income after taxes
Total assets

Jimco's return on investment in 1993 is

$1,800,000 = 0.58, or 5.8%
$32,000,000

industry average = 5.9%


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Finance For Strategic Management
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