Net Profit Before Taxes

Key Question

How much profit (before taxes) did you earn?

Net Profit Before Taxes

This shows the profitability of your business – after all costs have been paid, before considering profit taxes.

Ideally the Net Margin should be positive, steady or rising and adequate to generate the funds needed for reinvestment.

Reinvestment in the business is best funded by profits earned.

A low Net Margin means there is a ‘low margin of safety’ – in other words small changes can rapidly erode the bottom line.

If the Net Margin is declining or negative, you will rapidly deplete any cash reserves you have and you will most likely encounter mounting difficulty in paying your liabilities.