PART 8 RATIO ANALYSIS

Net Profit Margin $RELIANCE What is Net Profit? This is the final profit left after paying EVERYTHING – raw materials, salaries, rent, electricity, interest on loans, and taxes. This is the actual money the owner gets to keep. Formula: (Net Profit ÷ Sales) × 100 - Example: - Net Profit = ₹50,000 - Sales = ₹500,000 - Calculation = (50,000 ÷ 5,00,000) × 100 = 10% Interpretation: This means after paying all expenses, the owner finally keeps 10 paise as pure profit from every ₹1 of sale. This is the ultimate measure of success. A good net profit margin depends on the industry. For a grocery store, 2-3% is normal. For a software company, 20-30% is normal. If this number is negative, the company is making a loss.