Tuesday, October 29, 2019

Net Profit Margin as the Sole Performance Measure PowerPoint Presentation

Net Profit Margin as the Sole Performance Measure - PowerPoint Presentation Example The paper tells that a good management structure should be able to efficiently manage expenses and cost in order to increase profit. A company is not well managed if there is a decline in the net profit margin over successive financial periods. It means that it is not using the resources available efficiently. In the case of Integrated Technology Services UK Limited, it was becoming increasingly difficult to meet the 6% Net profit Margin. There were four factors that were found to be the contributing to the increase in overheads. The response was budgetary control and improving financial planning. Net profit margin brings to attention some avoidable or unnecessary costs that gross profit margin (gross profit over revenue as a percentage) may not be able bring out. Net profit margin can be used as a basis of price control. It provides the best benchmark through which to formulate a pricing strategy. Integrated technology Service UK Limited   has a fixed net profit margin of 6% .Cont racts with clients have to be calculated with this net profit margin percentage in consideration. Net profit margin as the sole performance measure has the advantage of being able to detect the company’s net earnings trends. A company that is doing well will have a consistent or increase in net profit margin. This is particularly important when looking for investors. Investors are not only looking for companies that have increasing profit over the years, but a company that is also having its net profit margin increasing over the years. Net profit margin can be used as a measure of a company’s strength.

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