Net Profit Ratio

Net Profit Ratio = Net Profit before tax x 100
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                         Net Sales

                            OR

                = Net Profit After tax x 100
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                       Net Sales

It is the most important ratio to the businessman. It is the amount left to the proprietors in the form of profit. It indicates the final tradin results of the business. It is a measure of overall profitability and is very useful to proprietors as well as investors in judging the prospects of return on their investment. It indicates as to what portion of net sales is available to the proprietors in the form of profit.

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