{"id":2030,"date":"2018-03-27T22:04:21","date_gmt":"2018-03-27T22:04:21","guid":{"rendered":"https:\/\/courses.lumenlearning.com\/wm-retailmanagement\/?post_type=chapter&#038;p=2030"},"modified":"2024-04-25T02:51:08","modified_gmt":"2024-04-25T02:51:08","slug":"net-profit-margin","status":"publish","type":"chapter","link":"https:\/\/courses.lumenlearning.com\/wm-retailmanagement\/chapter\/net-profit-margin\/","title":{"raw":"Net Profit Margin","rendered":"Net Profit Margin"},"content":{"raw":"<div class=\"textbox learning-objectives\">\r\n<h3>Learning Objectives<\/h3>\r\n<ul>\r\n \t<li>Calculate the net profit margin of a sample retailer<\/li>\r\n<\/ul>\r\n<\/div>\r\nNet profit margin = operating profit margin \u2013 (extraordinary non-recurring expenses \u00a0+ interest payments + taxes + depreciation). Interest payments include interest on business loans. Taxes include taxes paid to the government. Depreciation is how much any equipment has lost value during the period. This is calculated based on the useful life of the equipment, at the time of acquisition.\r\n\r\nAs you can see, the resulting net profit figure will be much different (smaller) than what is calculated for gross margin. And, that should make sense because of where the inputs are found within the income statement. That is, gross margin uses gross margin dollars. That figure comes early in the income statement <strong>before<\/strong>\u00a0additional expenses are applied. In fact, that\u2019s what \u201cgross\u201d refers to in gross margin. Gross means total or \u201cwithout deductions.\u201d\r\n\r\nBy comparison, net profit margin comes after all considerations of expenses. And, that is exactly what \u201cnet\u201d means\u2014with <strong>all<\/strong> expenses deducted.\r\n<div class=\"textbox tryit\">\r\n<h3>Practice Questions<\/h3>\r\nhttps:\/\/assess.lumenlearning.com\/practice\/6f37146b-18be-41e7-b761-07065d9e7e71\r\n<\/div>","rendered":"<div class=\"textbox learning-objectives\">\n<h3>Learning Objectives<\/h3>\n<ul>\n<li>Calculate the net profit margin of a sample retailer<\/li>\n<\/ul>\n<\/div>\n<p>Net profit margin = operating profit margin \u2013 (extraordinary non-recurring expenses \u00a0+ interest payments + taxes + depreciation). Interest payments include interest on business loans. Taxes include taxes paid to the government. Depreciation is how much any equipment has lost value during the period. This is calculated based on the useful life of the equipment, at the time of acquisition.<\/p>\n<p>As you can see, the resulting net profit figure will be much different (smaller) than what is calculated for gross margin. And, that should make sense because of where the inputs are found within the income statement. That is, gross margin uses gross margin dollars. That figure comes early in the income statement <strong>before<\/strong>\u00a0additional expenses are applied. In fact, that\u2019s what \u201cgross\u201d refers to in gross margin. Gross means total or \u201cwithout deductions.\u201d<\/p>\n<p>By comparison, net profit margin comes after all considerations of expenses. And, that is exactly what \u201cnet\u201d means\u2014with <strong>all<\/strong> expenses deducted.<\/p>\n<div class=\"textbox tryit\">\n<h3>Practice Questions<\/h3>\n<p>\t<iframe id=\"assessment_practice_6f37146b-18be-41e7-b761-07065d9e7e71\" class=\"resizable\" src=\"https:\/\/assess.lumenlearning.com\/practice\/6f37146b-18be-41e7-b761-07065d9e7e71?iframe_resize_id=assessment_practice_id_6f37146b-18be-41e7-b761-07065d9e7e71\" frameborder=\"0\" style=\"border:none;width:100%;height:100%;min-height:300px;\"><br \/>\n\t<\/iframe>\n<\/div>\n\n\t\t\t <section class=\"citations-section\" role=\"contentinfo\">\n\t\t\t <h3>Candela Citations<\/h3>\n\t\t\t\t\t <div>\n\t\t\t\t\t\t <div id=\"citation-list-2030\">\n\t\t\t\t\t\t\t <div class=\"licensing\"><div class=\"license-attribution-dropdown-subheading\">CC licensed content, Original<\/div><ul class=\"citation-list\"><li>Net Profit Margin. <strong>Authored by<\/strong>: Patrick Williams. <strong>Provided by<\/strong>: Lumen Learning. <strong>License<\/strong>: <em><a target=\"_blank\" rel=\"license\" href=\"https:\/\/creativecommons.org\/licenses\/by\/4.0\/\">CC BY: Attribution<\/a><\/em><\/li><\/ul><\/div>\n\t\t\t\t\t\t <\/div>\n\t\t\t\t\t <\/div>\n\t\t\t <\/section>","protected":false},"author":83755,"menu_order":9,"template":"","meta":{"_candela_citation":"[{\"type\":\"original\",\"description\":\"Net Profit Margin\",\"author\":\"Patrick Williams\",\"organization\":\"Lumen Learning\",\"url\":\"\",\"project\":\"\",\"license\":\"cc-by\",\"license_terms\":\"\"}]","CANDELA_OUTCOMES_GUID":"9303d102-0fc5-4754-9c53-12d1d435d2a5, c8b38ef7-3a84-420f-a4a0-2617665913bc","pb_show_title":"on","pb_short_title":"","pb_subtitle":"","pb_authors":[],"pb_section_license":""},"chapter-type":[],"contributor":[],"license":[],"class_list":["post-2030","chapter","type-chapter","status-publish","hentry"],"part":2010,"_links":{"self":[{"href":"https:\/\/courses.lumenlearning.com\/wm-retailmanagement\/wp-json\/pressbooks\/v2\/chapters\/2030","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/courses.lumenlearning.com\/wm-retailmanagement\/wp-json\/pressbooks\/v2\/chapters"}],"about":[{"href":"https:\/\/courses.lumenlearning.com\/wm-retailmanagement\/wp-json\/wp\/v2\/types\/chapter"}],"author":[{"embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/wm-retailmanagement\/wp-json\/wp\/v2\/users\/83755"}],"version-history":[{"count":10,"href":"https:\/\/courses.lumenlearning.com\/wm-retailmanagement\/wp-json\/pressbooks\/v2\/chapters\/2030\/revisions"}],"predecessor-version":[{"id":6475,"href":"https:\/\/courses.lumenlearning.com\/wm-retailmanagement\/wp-json\/pressbooks\/v2\/chapters\/2030\/revisions\/6475"}],"part":[{"href":"https:\/\/courses.lumenlearning.com\/wm-retailmanagement\/wp-json\/pressbooks\/v2\/parts\/2010"}],"metadata":[{"href":"https:\/\/courses.lumenlearning.com\/wm-retailmanagement\/wp-json\/pressbooks\/v2\/chapters\/2030\/metadata\/"}],"wp:attachment":[{"href":"https:\/\/courses.lumenlearning.com\/wm-retailmanagement\/wp-json\/wp\/v2\/media?parent=2030"}],"wp:term":[{"taxonomy":"chapter-type","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/wm-retailmanagement\/wp-json\/pressbooks\/v2\/chapter-type?post=2030"},{"taxonomy":"contributor","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/wm-retailmanagement\/wp-json\/wp\/v2\/contributor?post=2030"},{"taxonomy":"license","embeddable":true,"href":"https:\/\/courses.lumenlearning.com\/wm-retailmanagement\/wp-json\/wp\/v2\/license?post=2030"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}