- This topic has 3 replies, 2 voices, and was last updated 10 years ago by
.
-
Posts
-
In BPP REVISION KIT TFR Co.(FMC, 6/07), the net profit margin is given to be 20%. This net profit margin is taken in the solution as before interest and tax but in reality net profit margin is after interest and tax. Please clarify the same.
In financial accounts, net profit is indeed after interest and tax.
However we are not doing financial accounts here, and when measuring the performance of the managers, net profit always means net operating profit (i.e. before interest and tax). (Which is sensible – the managers have no control (for example) on changes in tax rates and should not be measured on it.)
I do make this point in the free lectures.
(Our free lectures are a complete course for Paper F9 and cover everything needed to be able to pass the exam well.)
- You must be logged in to reply to this topic.