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Respected Tutor, is there a general rule of thumb for the Net Profit used in calculating the profit margin?
In some places, for instance in the following:
(ROCE = NP Margin * Asset Turnover)NP is taken as NPBIT (Net Profit Before Interest and Tax).
But in other cases, for example questions asking simple calculations of this margin, NP is taken as Net Profit after Interest but before Tax, and sometimes simply as Net profit after both tax and profit.
What’s the formula to be used? For example in a question with a detailed SOPL, which figure would we pick for NP? NPBIT, NPBT or PAT (After tax)
Unfortunately there isn’t really a rule (unless the question says ‘net operating profit’ – this always means profit before interest and tax).
When looking at financial ratios it is virtually always the net operating profit that is relevant.
Hmm alright. Hopefully this won’t be an issue.
Also: Is it right to say that redeemable preference shares form part of Long-term Loans (or Long-Term Loan Capital) but are excluded from shareholder’s equity?
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