This ratio indicates the relationship between net profit and sales. This ratio shows the percentage of net profit to sales.
Net Profit Ratio = \(\frac{Net \,Profit\, after\, tax}{ Net Sales} × 100\)
Net profit after tax can be find out as under:
- While calculating net profit ratio, all types of income and expenses are taken into consideration.
- The overall profitability of business can be seen through this ratio.
- This ratio is income based ratio, so its increasing trend indicates the enhancement in total profitability.
