DFS - Profit Percentage Ratios

val0123

Hi,

Getting mystelf totally confused with the profit percentage ratios for the dfs exam when asked to answer a question on the net profit percentage:

I understand the ratio to be: profit/ revenue x 100

However, where i'm confused is where to get the net profit figure from ? I always want to opt for the bottom line of the income statement, being 'profit after interest and taxation', but in my text book they seem to be going for the Profit from operations figure, which I thought was operating profit percentage ? Is this figure the net profit also and i've just lost the plot ?

If anybody could help i'd very much appreciate it.

Thanks

noodles

I understand that profit from operations is also net profit. I do hope I am right as I feel like you, very frustrated with it all now.
you also get a profit before tax % which is as it says pbt/revenue*100
nicky

val0123

Thanks

NO BUSINESS CASE

Net profit will always be Profit from operations as the relationship is between Revenue-Cost of Sales and then Expenses (admin & distribution costs).

Usually an upward move in expenses (admin & distribution costs) will lead to a fall in net profit percentage and then the answer may well be that the company need to get a hold of their expenses to make sure that all their gross profit isn't wiped out!

Profit after interest and tax will mainly be of interest to those who hold the equity as this is the bottom line figure and I guess most importantly is distribuatble to the firms owners!

val0123

Thank you, I understand now ! One panic down before the exam - about another hundred to go !!!

jewels.p

It's the Profit Figure for ROCE and Return on Equity I keep getting mixed up!