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Net Profit ratio

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › Net Profit ratio

  • This topic has 1 reply, 2 voices, and was last updated 3 years ago by John Moffat.
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  • Author
    Posts
  • November 5, 2021 at 10:47 am #639994
    fizaali
    Participant
    • Topics: 53
    • Replies: 36
    • ☆☆

    Sir, we have learnt that the Net Profit ratio is calculated as:
    (Net Profit / Sales revenue) x 100

    BUT in Paper PM it is different and calculated as:
    (Profit before interest & tax / Sales revenue) x 100

    Why is that so?

    All the other ratios remain the same in paper PM [correct?]

    November 5, 2021 at 3:54 pm #640013
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54701
    • ☆☆☆☆☆

    Although in financial accounting net profit usually means the profit after interest and tax, when looking at management performance it means the net operating profit i.e. the profit from operations which is before interest and tax.

    I do make this clear in my free lectures.

    The other ratios are the same, but I do work through them in my lectures.

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