Question

The Disney Theme Parks have a net margin percentage of 12.1% and Six Flags has a net margin percentage of 9.5%.  Define Net Profit Margin%. Considering only net profit and gross profit, which retailer is the higher performing retailer? What does this say about each company’s overall costs?

Answer 1

Net Profit Margin is a Profitability ratio used to assess a firm's financial stability and overall Health.

Net profit Margin is the ratio of net profit to Revenues for a firm's.Net Profit Margin show how much of each dollar collected by a firm as Revenue convert into Profit.

Net profit is the gross profit minus operating expenses & all other expenses (interest & Taxes).

Net profit = Gross Profit - Operating expenses- other Expenses

Net profit Margin = Net Profit/ Revenue ×100.

In this question,

Retailer DISNEY THEME PARKS has a higher Net Profit Margin.

Net profit Margin of 12.1% means that every $1 sales Contribute 12cents towards the Net Profit of the Retailer Disney theme Parks.

Where else, Six Flag contribute to 9cent per dollar sale.

With Profit Margin we can say low net Income has high expenses.

Retail Six Flag has Net Profit Margin of 9.5% means almost 90% of Revenue is spend to pay on operating expenses & other indirect expenses.

Retail Disney theme Parks spend it's (100%-12.1%)=78%approx. Revenue on payment of direct and indirect expenses.