What does a net profit margin of 15% and an industry average of-1.2% mean?

What does a net profit margin of 15% and an industry average of -1.2% mean?

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Expert Solution

Net Profit Margin :

Net Profit Margin of 15% means that the company is earning from 15 % net of expenses per year. It means the profit % of the compaby after deducting all the costs and expenses ( direct and indirect )

Net profit margin formula = Net profit of the company / Total sales of the company

It means that company is earning net 15% from its sales.

Industry Average :

Industry average means the average figure of all the companies with in the particluar industry ( for eg : pharma industry ) . Industry average of -1.2% means that the on an average basis net profit margin of the companies in the industry is -1.2 %. Some has more than -1.2 % and some has even less than -1.2% and in such way maintaining the averagre of -1.2%.

If company has net profit margin of 15% and industry avergae for the same is -1.2% then it means company is performing very well as compared to other competitors in the industry.

jeff jeffy answered 2 years ago

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