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the view of performance depending upon the accounting and financing policies of the business. Supporters argue it reduces management's ability to change the profits they report by their choice of accounting rules and the way they generate financial backing for the company. This metric excludes from consideration expenses related to decisions such as how to finance the business (debt or equity) and over what period they depreciate fixed assets. EBITDA is typically closer to actual cash flow than is
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Net profit measures the fundamental profitability of the business. It is the revenues of the activity less the costs of the activity. The main complication is in more complex businesses when overhead needs to be allocated across divisions of the company. Almost by definition, overheads are costs that
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is a very popular measure of financial performance. It is used to assess the 'operating' profit of the business. It is a rough way of calculating how much cash the business is generating and is even sometimes called the 'operating cash flow'. It can be useful because it removes factors that change
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of the business. Companies are collections of projects and markets, individual areas can be judged on how successful they are at adding to the corporate net profit. Not all projects are of equal size, however, and one way to adjust for size is to divide the profit by sales
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619:. A good operating margin is needed for a company to be able to pay for its fixed costs, such as interest on debt. A higher operating margin means that the company has less financial risk.
158:. The resulting ratio is return on sales (ROS), the percentage of sales revenue that gets 'returned' to the company as net profits after all the related costs of the activity are deducted.
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456:{\displaystyle {\text{EBITDA}}\ (\$ )={\text{Net profit}}\ (\$ )+{\text{Interest Payments}}\ (\$ )+{\text{Taxes Incurred}}\ (\$ )+{\text{Depreciation and Amortization Charges}}\ (\$ )}
122:. ROS is an indicator of profitability and is often used to compare the profitability of companies and industries of differing sizes. Significantly, ROS does not account for the
177:: To calculate net profit for a unit (such as a company or division), subtract all costs, including a fair share of total corporate overheads, from the gross revenues.
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130:) used to generate the profit. In a survey of nearly 200 senior marketing managers, 69 percent responded that they found the "return on sales" metric very useful.
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Operating margin can be considered total revenue from product sales less all costs before adjustment for taxes, dividends to shareholders, and interest on debt.
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It is a measurement of what proportion of a company's revenue is left over, before taxes and other indirect costs (such as rent, bonus, interest,
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margin, operating margin takes into account depreciation and amortization expenses. {NNP = GNP- depreciation /GNP = GDP- depreciation
349:. ... EBITDA can be calculated by adding back the costs of interest, depreciation, and amortization charges and any taxes incurred.
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cannot be directly tied to any specific product or division. The classic example would be the cost of headquarters staff.
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332:{\displaystyle {\text{Return on sales}}\ (\%)={\frac {{\text{Net profit}}\ (\$ )}{{\text{Sales revenue}}\ (\$ )}}}
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602:{\displaystyle {\text{Operating margin}}={\tfrac {6,318}{20,088}}={\underline {\underline {31.45\%}}}}
245:{\displaystyle {\text{Net profit}}\ (\$ )={\text{Sales revenue}}\ (\$ )-{\text{Total costs}}\ (\$ )}
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149:. Probably the most common way to determine the successfulness of a company is to look at the
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93:{\displaystyle {\text{Operating margin}}={\frac {\text{Operating income}}{\text{Revenue}}}.}
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endorses the definitions, purposes, and constructs of classes of measures that appear in
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Farris, Paul W.; Neil T. Bendle; Phillip E. Pfeifer; David J. Reibstein (2010).
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Farris, Paul W.; Neil T. Bendle; Phillip E. Pfeifer; David J. Reibstein (2010).
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Marketing
Metrics: The Definitive Guide to Measuring Marketing Performance.
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Marketing
Metrics: The Definitive Guide to Measuring Marketing Performance.
615:.), after paying for variable costs of production as wages, raw materials,
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Earnings Before
Interest, Taxes, Depreciation, and Amortization (EBITDA)
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Earnings before interest, taxes, depreciation, and amortization (EBITDA)
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Common
Language: Marketing Activities and Metrics Project
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Upper Saddle River, New Jersey: Pearson
Education, Inc.
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The Coca Cola
Company Form 10-K SEC Filing 2006, p 67
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These financial metrics measure levels and rates of
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227:Total costs
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732:Categories
692:0137058292
648:References
524:Net Income
378:Net profit
292:Net profit
187:Net profit
128:investment
105:Net profit
595:_
591:_
587:%
496:$ 15,924
485:$ 20,088
448:$
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368:$
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279:%
237:$
223:−
217:$
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57:net sales
707:Archived
626:See also
528:$ 5,080
518:$ 6,578
509:$ 6,318
21:business
748:Pricing
156:revenue
141:Purpose
133:Unlike
124:capital
120:revenue
83:Revenue
694:. The
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175:profit
584:31.45
347:NOPAT
55:) to
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39:and
617:etc
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172:Net
45:ROS
19:In
734::
663:^
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53:UK
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