This is probably one of the most important profit indicators for a business to measure. It provides you with the dealership result as opposed to an individual departmental result.
This N.P.B.I % statistic gives you the capability to measure the ability of the company to retain profit from the products and services that it is selling, without taking the cost of capital into account.
This means that you can accurately compare two companies, on a like-for-like basis, without the interference of their financial stability or borrowings. This is critical when you are using Composite comparison.
Example:
A) N.P.B.I. = R508,327 B) Company Turnover = R14,523,661 C) N.P.B.I. % = 3.5% (A ÷ B X 100)
Discussion:
Without doubt, this KPI is the best measurement when comparing the profitability between companies. It simply states how much of your turnover has been retained as profit. (Before Interest)