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Fire Your Stock Analyst!: Analyzing Stocks on Your Own by Harry Domash

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Net Profit Margin

The net profit margin calculation takes all other expenses not included in the operating margin calculation into account, namely interest expenses and income taxes.

Income before taxes is the operating income (EBIT) less interest expenses:

income before taxes = operating income – interest expense

Net income is operating income less interest expenses and income taxes.

net income = operating income – interest expense – income taxes

The net profit margin is net income divided by total sales:

net profit margin = net income/total sales

The net profit margin is often simply called the profit margin. Net income is the bottom line, and EPS is the net income divided by the number of outstanding shares.

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