I am new to investing an have looked a few videos on evaluation company finances. I am now trying to apply this knowledge to an example company, Microsoft.
On the key statistics page it says that the Operating Margin 42.56% and (net) Profit Margin is 37.63%
Let’s try to calculate these values with the income statement items on this page, first the Operating Margin:
Gross Profit:
| total revenue | 192’557’000 |
|---|---|
| cost of revenue (COGS) | 60’212’000 |
| Gross Profit | 192’557’000 – 60’212’000 = 132’345’000 |
Operating Expenses:
| Selling General and Administrative Costs | 27’051’000 |
|---|---|
| R&D | 23’350’000 |
| Operating Expenses | 27’051’000 + 23’350’000 = 50’401’000 |
So:
So far so good. But I am having trouble getting to the net profit margin. I have learned that:
-
Net Profit Margin = (Net Income / Revenue) * 100%
-
Net Income = Total Revenue – (COGS + selling, general and administrative costs + operating expenses + depreciation + interest + taxes + other expenses)
So (line items coming from Yahoo! Finance Income Statement):
| COGS | 60’212’000 |
|---|---|
| Selling General and Administrative Costs | 27’051’000 |
| Operating Expenses | 50’401’000 (see above) |
| Depreciation | 13’825’000 |
| Interest Expense | 2’120’000 |
| Tax Provision | 10’178’000 |
| Other Expenses (I don’t see any listed) | 0 |
| Total Expenses | 136’736’000 |
So:
But according to Yahoo! the Net Profit Margin = 37.63%. From this I derive that the Total Expenses according to Yahoo! are 72’456’000 (because (72456000 / 192’557’000) * 100% = 37.63%)
My question is: what am I doing wrong? My calculated Net Income is (72’456’000 – 55’821’000) 16’635’000 too low, but I cannot find any other line items that add up to 16’635’000.
Can someone show me, based on the line items on Yahoo! Finance how I can correctly calculate the Net Profit Margin? Any help is greatly appreciated!
