Net Profit Margin Matrix

The Net Profit Margin Matrix is a 2x2 matrix used to assess the profitability of a business. It divides businesses into four categories based on their net profit margin and their sales growth rate.

At a very high level, the Net Profit Margin Matrix is used in the context of business, finance, marketing.

Net Profit Margin Matrix quadrant descriptions, including examples
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What is the Net Profit Margin Matrix?

A visual explanation is shown in the image above. The Net Profit Margin Matrix can be described as a matrix with the following quadrants:

  1. High Net Profit Margin & High Sales Growth: Businesses with high net profit margins and high sales growth are outperforming the market and are likely to be successful in the long-term. Example: A company with a net profit margin of 20% and a sales growth rate of 10%.
  2. High Net Profit Margin & Low Sales Growth: Businesses with high net profit margins but low sales growth are underperforming and may need to focus on improving their sales growth rate. Example: A company with a net profit margin of 20% and a sales growth rate of -2%.
  3. Low Net Profit Margin & High Sales Growth: Businesses with low net profit margins and high sales growth are underperforming and may need to focus on improving their net profit margin. Example: A company with a net profit margin of 5% and a sales growth rate of 10%.
  4. Low Net Profit Margin & Low Sales Growth: Businesses with low net profit margins and low sales growth are underperforming and may need to focus on improving both their net profit margin and their sales growth rate. Example: A company with a net profit margin of 5% and a sales growth rate of -2%.

What is the purpose of the Net Profit Margin Matrix?

The Net Profit Margin Matrix is a 2x2 matrix used to assess the profitability of a business. It divides businesses into four categories based on their net profit margin and their sales growth rate. The matrix can be used to identify businesses that are either underperforming or outperforming the market, and to identify areas of potential improvement.

The matrix is divided into four quadrants. The top-left quadrant represents businesses with high net profit margins and high sales growth. These businesses are considered to be outperforming the market and are likely to be successful in the long-term. The top-right quadrant represents businesses with high net profit margins but low sales growth. These businesses are considered to be underperforming and may need to focus on improving their sales growth rate. The bottom-left quadrant represents businesses with low net profit margins and high sales growth. These businesses are considered to be underperforming and may need to focus on improving their net profit margin. The bottom-right quadrant represents businesses with low net profit margins and low sales growth. These businesses are considered to be underperforming and may need to focus on improving both their net profit margin and their sales growth rate.


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What templates are related to Net Profit Margin Matrix?

The following templates can also be categorized as business, finance, marketing and are therefore related to Net Profit Margin Matrix: Effort Impact Matrix, Gap Analysis Matrix, Growth Share Matrix, Kraljic Matrix, Outsourcing Matrix, Quadrant Analysis, Risk Analysis Matrix, Risk Value Matrix. You can browse them using the menu above.

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