In a case where a measured entity did not generate profit for that particular year, the Codes have provided for the use of industry norms applying the Indicative Profit Margin formula to determine the actual contribution.
The Net Profit After Tax (NPAT) or average target applies unless the company does not make a profit last year or on average over the last five years must be used.
The net profit margin is less than a quarter of the norm in the industry.
If the Turnover is to be used, the target will be set at 1% x Indicative Profit Margin (NPAT/Turnover) x Turnover. Indicative profit margin is the profit margin in the last year where the company’s profit margin is at least one quarter of the industry norm.
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