The most common thought among business owners, consultants, investors and students is the ‘bottom line’. The proper word is of course ‘PROFIT’. In business, the single number one reason to operate is to make a profit.
Operational profit is the amount reported on the income statement associated with regular operations. It is often confused with EBITDA and net profit. In general, operational profit is sales less cost of sales and expenses (overhead). It is defined differently in each business sector and the respective industries.
The net profit margin reflects the profitability of the company as a percentage of net sales. It is one of the performance ratios used in evaluating business. Interestingly, some consider it the most important ratio. These users of business ratios take a very simplistic approach towards business evaluation.