Net Profit After Interest ÷ Company Turnover (x100)
Baseline: > 2%
Description:
This is the KPI that many franchise manufacturers refer to when discussing levels of profitability within their dealer networks and it is often referred to as the company's bottom line.
It is also referred to as Net Profit After Interest or Net Profit Before Tax on some financial reports and the only other item to be deducted from this figure is taxation.
Many business owners consider this to be one of the figures that holds the most importance, as it provides you with the profit you have retained as a percentage of the products and services that you have sold.
It is important to keep an eye on the trend of this KPI because a diminishing trend could indicate that you are working harder for a lower return, a condition otherwise known as busy fool syndrome.
Example:
A) Net Profit After Interest = R363,091 B) Company Turnover = R14,523,661 C) Return on Sales % = 2.5% (A ÷ B X 100)
Discussion:
This statistic is obviously influenced by Net Profit Before Interest and of course the level of interest that you are paying.
Related Terminology:
(See also Net Profit Before Interest % and Interest % )