I. Net profit rate
1. Net profit rate refers to the proportion of net profit obtained in the process of enterprise operation to net sales. This index reflects the operating efficiency of the enterprise in the form of percentage. Generally speaking, the bigger the better. The net profit is determined by the total profit and income tax rate, and the main business income is determined by the company's sales performance.
2. The net profit rate, also known as the net profit rate of sales, is an important indicator reflecting the company's profitability. It is the profit rate after deducting all costs, expenses and corporate income tax. The amount of net profit depends on two factors: one is the total profit, and the other is the income tax rate.
Second, the significance of net profit rate
1, which can reflect the change of the company's profitability and comprehensively reflect the operating efficiency of an enterprise or an industry. Predicting the economic development trend, the number of employees and income will increase with the increase of profits, while the number of employees and income will decrease with the decrease of net profit. Profit urges people to invest their savings in profitable enterprises or industries, while net profit provides the largest source of funds for economic growth.
2. The net profit rate is the percentage of operating net profit to net sales or the percentage of invested capital. In accounting, profit can be divided into gross profit (the difference between sales volume and cost of goods sold), operating profit (the difference between gross profit and operating expenses) and net profit (the difference between operating profit and income tax). Different periods, different industries and different enterprises have different profits.
Third, how to look at the indicator of net profit rate?
1, the net profit margin is generally low, usually companies facing fierce price competition or doing bulk commodities. The higher the net profit rate, the more companies with dominant market position and higher barriers can be found.
2. Without distinctive, competitive and differentiated products, it is difficult to maintain a high net profit margin. If we maintain a high net profit margin, it will lead to the expansion of competitors' capacity in the industry, resulting in future overcapacity, which will lead to a decline in the overall net profit margin. Finally, managers will take long-term supply-side reforms to reduce production capacity and finally reach a new balance point of net profit margin. If you find that the net profit margin is unsustainable, you need to reconsider the valuation.