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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Net profit margin percentage is calculated by

a. dividing operating income by (net) sales.

b. subtracting operating income from (net) sales.

c. dividing net income by (net) sales.

d. subtracting net income from (net) sales.

To determine

Net Profit Margin Ratio:

The net margin ratio is a type of profitability ratio which is used to measure the returns and earning after all expenses i.e. net earnings and compute the ratio in respect to the sales of the business. It is computed by dividing t he net income by net sales.

To select:

The best formula for computing the net profit margin percentage.

Explanation

The operating income margin percentage is computed when the operating income is divided by the net sales. Hence, option (a) is not correct.

The non-operating income is computed when the operating income is subtracted from the net sales. Hence, option (b) is not correct

The net profit margin percentage is computed when the net income is divided from the net sales...

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