After-Tax Profit Margin

After-Tax Profit Margin

A ratio of financial performance calculated by dividing net income after taxes, by net sales. A company's after-tax profit margin is important as it tells investors the percentage of money a company actually earns per dollar of sales.

Interpretation is the same as with profit margin, the after-tax profit margin is simply more stringent as it takes into account taxes.

Notes:

Looking at the earnings of a company often doesn't tell the entire story. The amount of profit can increase but it does not mean its profit margin is improving. For example a company could have increased the amount of sales but if costs have also risen, it leads to a lower profit margin then had been seen with a lower profit. This is an indication that costs need to be under better control.

See also: Net Income, Net Sales, Profit Margin

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After-tax profit margin

The ratio of net income to net sales.