Expert: Arthur Naman - 7/2/2010

Question
Sometimes the net profit margin of a business remains the same from one year to another. Can this occur when expenses do not change from one year to another?

Answer
If income and expenses move such that the percentages remain the same then the net profit percentage will in fact remain constant.

If gross revenues increase and expenses increase by a the correct amount, then the net profit percentage will remain the same.

With pencil and paper, or a spreadsheet, try it out and you will see than expenses can increase in such a manner that the net profit percentage remains the same.

Please ask a follow-up if this is not clear.