The Net Profit Margin Formula The net profit margin formula may appear daunting but is in fact very straightforward to use. (R-COGS-E-I-T) x WHERE: R = revenue COGS = the cost of goods sold E = operating and other expenses I= interest T = taxes Once we have plugged some numbers into this formula, the picture becomes much clearer. Also note that multiplying the entire result by one hundred will give us a decimal value that can (and often is) expressed as a percentage of total revenue. For our example, let's use the values from the table below. Revenue COGS ABC Corp Operating and other expenses Interest Taxes Click or tap to enlarge x 100 Cleaning that up a little bit gives us the following result: With this information plugged into the formula, we can calculate the net profit margin for our example ABC Corp, as shown below. 23,900 72,300 $72,300 $23,600 $21,000 ( 72,300 – 23,600 - 21,000 – 900 – 29,000): 72,300 -) $900 $2,900 x 100 = 33.1% x 100 As we can see, the net profit margin for ABC Corp is 33.1%. This means that of every sales dollar-or dollar of revenue-ABC Corp keeps 33.1 cents after all costs have been accounted for.

The Net Profit Margin Formula The net profit margin formula may appear daunting but is in fact very straightforward to use. (R-COGS-E-I-T) x WHERE: R = revenue COGS = the cost of goods sold E = operating and other expenses I= interest T = taxes Once we have plugged some numbers into this formula, the picture becomes much clearer. Also note that multiplying the entire result by one hundred will give us a decimal value that can (and often is) expressed as a percentage of total revenue. For our example, let's use the values from the table below. Revenue COGS ABC Corp Operating and other expenses Interest Taxes Click or tap to enlarge x 100 Cleaning that up a little bit gives us the following result: With this information plugged into the formula, we can calculate the net profit margin for our example ABC Corp, as shown below. 23,900 72,300 $72,300 $23,600 $21,000 ( 72,300 – 23,600 - 21,000 – 900 – 29,000): 72,300 -) $900 $2,900 x 100 = 33.1% x 100 As we can see, the net profit margin for ABC Corp is 33.1%. This means that of every sales dollar-or dollar of revenue-ABC Corp keeps 33.1 cents after all costs have been accounted for.

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter8: Cost Analysis

Section: Chapter Questions

Problem 9E

See similar textbooks

Similar questions

W7 Q5 A paper published in the Harvard Business Review points out a new way to calculate economic profit that could be more appropriate for service firms and other people-intensive companies. Instead of focusing on investment and return on investment, the focus is on employee productivity, in terms of both generating revenues and reducing costs. The approach is to first determine economic profit in the conventional way, except that we ignore taxes, so that economic profit is before tax, as follows: Economic profit = Operating profit − Capital charge Assume the following information for a hotel chain that wishes to adopt the new method. The firm has $100 million in operating profit, has $1 billion in investment, and uses a cost of capital rate of 5%, so the capital charge is $50 million and the economic profit is $50 million. Relevant calculations are contained in Part 1 of the following schedule: Part 1: Economic Profit (in thousands, except cost of capital rate) Revenue…
Complete the following table by calculating the contribution to profit and overhead for each of the 10 time periods and prices. Time Period Price Quantity Sold Total Contribution ($) (Million) ($ Million) 1 2,400 0.2 2 2,200 0.2 3 2,000 0.2 4 1,800 0.2 5 1,700 0.2 6 1,600 0.2 7 1,500 0.2 8 1,400 0.2 9 1,300 0.2 10 1,200 0.2 Over the 10 periods, the total contribution to profits and fixed costs from price skimming is million.
If the marginal personal tax rate imposed on interest income paid to bondholders were to increase, holding the corporate tax rate and the personal tax rate on payments to equity (e.g., taxes on dividends), what is the impact on the marginal benefit of debt to the corporation? How might this effect the optimal amount of debt the firm should have in its capital structure?
The profit function is the same as in Question 40 and 41. Profit =200L+100K-10L^2-20K^2+20KL. After determining the profit-maximizing level of Labor (L) 25 and Capital (K) 15 how much are the profits of the firm at the profit-maximizing levels of L and K? Its not 46!.
Show the effect of a 25% profit tax on the accounting profit of all firms in a competitive industry. Consider all time periods.
Business-process outsourcing (BPO) is a type of outsourcing that consists of contracting operations and responsibilities of a specific business process (e.g., human resources) to a third-party service provider. Such outsourcing generally began with manufacturing firms outsourcing their supply chain but has grown into a much wider range of processes, including marketing, finance, sales, and accounting. According to a recent Forbes article, the revenue of the global outsourced services industry rose from $45 billion in 2000 to nearly $100 billion in 2012. Competition among firms in the BPO market is strong. Companies based in the United States include HP Enterprise Services, Affiliated Computer Services, and Automated Data Processing (ADP). A number of Indian companies, however, also provide worldwide BPO services, such as Infosys, Wipro, and Genpact. An article in BusinessWeek suggested that BPO can save end users anywhere from 15 to 85 percent. International BPO service providers are…
You are analyzing a new company’s records projecting their profits using a marginal profit function, P′(x), where P is profit, in thousands of dollars, and x is the number of items they sell, in hundreds. the integral is from 5 to 1 for P ′(x) dx = 22. If the company projects to earn $26,000 of profit from selling 500 items and $7000 of that revenue from selling 100 items, what is their projected cost from selling 100 items?
According to the data from a company, the marginal revenue of a product (in billions of dollars per year) is approximated by 3.94 + 0.06x + 0.012x^2 , where x = 0 corresponds to 1987. what was rhe total revenue from the beginning of 1998 through the end of 2004?
Sub : EconomicsPls answer very fast.I ll upvote correct answer. Thank You Frustrated with DTCs monopoly, several diamond mining interests and large retailers collectively set up a joint venture called Adamantia to act as a com- petitor to DTC in the wholesale market for diamonds. The wholesale price is now given by P =120−QD −QA, where QA is the quantity that Adamantia chooses to sell. Assume that Adaman- tia also has a cost of 30 (hundred dollars) per high-quality diamond. Answer the following questions and show your work. (A) Write DTC’s profit, ΠD, in terms of QD and QA in this duopoly situation. Find the DTC’s best response function. (B) Write Adamantia’s profit, ΠA, in terms of QD and QA. Find the Adamantia’s best response function. (C) What quantity does each wholesaler supply to the market in Nash equilibrium? (D) What wholesale price do these quantities imply? What will the Nash equilib- rium profit of each supplier be in this duopoly situation?
As an example of a company that did not ignore its cost of capital, consider Coca-Cola in the 1980’s. It had very little debt because it preferred to raise equity capital from its stockholders. It also had a diversified product line, including products like aquaculture and wine. But none of these activities earned as much as its soft drink division. The opportunity cost of investing in these unrelated businesses was the forgone opportunity to expand the soft drink division, which at the time was earning a 16 percent return on capital. Although, these other businesses were earning a positive 10 percent rate of return on capital, the opportunity cost of that capital was 16 percent. CEO Robert Goizueta correctly decided to sell off these under-performing divisions and invest the capital in its soft drink division. By making decisions whose benefits were greater than their costs, the topic of this chapter, Coca-Cola increased its profitability.
This is a repeated question since you guys only answerone question at a time! Let's assume that a firm's total weekly costs are as follows: 1. Salaries = $2,600. 2. Supplies = $400. 3. Rent = $800.In addition, the owners have invested their own money into the business. This could have earned them interest of $150 per week if they had chosen to put it into a bank instead of investing it into their business. If the firm has weekly revenue of $4,000, what are the firm's accounting profit and economic profit? Show your work please.
Distinguish between implicit and explicit costs. How is it possible to havepositive accounting profit and negative economic profit concurrently?