Profitability Ratios measure the company's use of its assets and control of its expenses to generate an acceptable rate of return. The purpose of these ratios is to help us identify how profitable an organization is. As an investor I would like to invest only in company's that are profitable and in best case profitable than all their industry peers.
Some of the ratios that can help us identify a company's profitability are:
1. Gross Margin or Gross Profit Margin
2. Operating Margin or Operating Profit Margin or Return on Sales (ROS)
3. Profit Margin or Net Profit Margin
4. Return on Equity (ROE)
5. Return on Investment (ROI)
6. Return on Assets (ROA)
7. Return on Assets DuPont (ROA DuPont)
8. Return on Equity DuPont (ROE DuPont)
9. Return on Net Assets (RONA)
10. Return on Capital (ROC)
11. Risk Adjusted Return on Capital (RAROC)
12. Return on Capital Employed (ROCE)
13. Cash Flow Return on Investment (CFROI)
14. Efficiency Ratio
15. Net Gearing or Gearing Ratio
16. Basic Earnings Power Ratio
Profit margin and asset turnover
profit margin = net income / total revenue
gross profit ratio
what is the industry average for the profitability ratio of the net profit margin for the NAICS code 721120.
Leverage ratios are used to find out that how much earnings has effects on overalll cashflows and profit of business.
when a number of ratios give the same answer after solving the ratios the ratios are said to be equivalent ratios
Ratios are often classified using the following terms: profitability ratios (also known as operating ratios), liquidity ratios, and solvency ratios.
Ratios
1 - Activity ratios 2 - Profitability ratios 3 - Liquidity ratios
1 - Activity Ratios 2 - Liquidity ratios 3 - Profitability ratios
Their are two ways select ratio analysis & tally gives you various ratios alternatively select profit & loss account Press F12 & select show percentages as yes and save
equivalent ratios are different ratios that name the same comparison