Common-Size Income Statements and Margin

How does net profit margin differ from operating profit margin in what it captures?

Net margin includes interest and taxes; operating margin does not.

What does EBIT margin measure in profitability analysis?

Operating profitability relative to revenue.

If a company's effective tax rate rises with unchanged pre-tax operating performance, what happens to net profit margin?

Net profit margin usually declines due to a higher tax burden.

What does a rising effective tax rate imply when pretax operating performance is unchanged?

A greater share of pretax income is lost to taxes.