Key Performance Indicators (KPI)

2

Net profit margin

Strategic perspective

Financial perspective

Key performance question this indicator helps to answer

How much profit are we generating for each dollar in sales?

Why is this indicator important?

With the previous KPI we looked at net profit as a total number. In order to make net profits more comparable and to understand how much profit a company makes for each dollar in revenue we can produce the net profit margin (also referred to as return on sales or net income margin), which takes the net profit of a company as a ratio over its total sales or revenues.

The net profit margin is therefore a key indicator of how well a company is run (i.e. how efficient it is and how well it controls its costs), as a low net profit ...