Description
FRNetProfitMargin returns the ratio between NetProfit and Sales.
Format
FRNetProfitMargin(NetProfit, Sales)
Arguments
NetProfit is a Number or formula. NetProfit is the amount of earnings a company earns during the year from the sale of its products or services minus all the expense items. It is the bottom line figure in a company's income statement. Some analysts may want to use the net profit before extraordinary items and/or income taxes for calculating this ratio.
Sales is a Number or formula. Sales is the total sales during the period that appears in a company's income statement.
Action
FRNetProfitMargin returns the ratio between NetProfit and Sales (for example, NetProfitMargin = NetProfit / Sales).
Typical uses
This ratio is used to measure how well the company is doing. The higher the result, the more profitable the company.
Examples
FRNetProfitMargin(3, 50)
Returns 0.06.
FRNetProfitMargin(5.6, 100)
Returns 0.056.
None of the arguments can be negative; you may have to check for negative values before passing the arguments.
Comments
FRNetProfitMargin is one of the many financial analysis tools used in interpreting the financial position of a company. As in the case of all ratios, it has to be used with caution. It can just be used as a clue and not solid proof for forming a judgment on the financial status of a company.
Neither one of the ratios can be used alone for doing financial analysis and there are no fixed rules on the results of the ratios. Apart from differences between type of industries, result varies among different companies within the same industry and within different account periods. The results should only be used for relative comparison and trend analysis, rather than treating them as something absolute.