Do we include finance cost while calculating net profit ratio?

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Solution

Dear Student,

$N e t P r o f i t R a t i o = \frac{R e v e n u e f r o m o p e r a t i o n s - C o s t o f g o o d s s o l d - O p e r a t i n g e x p e n s e s - I n t e r e s t o n l o n g t e r m b o r r o w i n g s - t a x e s}{R e v e n u e f r o m o p e r a t i o n s} \times 100 % N e t p r o f i t r a t i o = \frac{N e t i n c o m e}{R e v e n u e f r o m o p e r a t i o n s} \times 100 %$

Therefore, finance cost is also included while calculating net profit ratio.
Regards

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