Strategic Management: Formulation and Implementation

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%