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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
What else can I help you with?
Return on Investment is composed of what two ratios?
Profit margin and asset turnover
What is the Formula for calculating profitability ratios?
profit margin = net income / total revenue
What ratios in accounting is a common analytical tool used by merchandise corporation but not service corporations?
gross profit ratio
How can I find past years ratios for a company?
what is the industry average for the profitability ratio of the net profit margin for the NAICS code 721120.
Why leverage ratio is used in financial statement analysis?
Leverage ratios are used to find out that how much earnings has effects on overalll cashflows and profit of business.
Which ratios would be most useful for a financial manger's internal financial analysis?
For a financial manager's internal financial analysis, key ratios include liquidity ratios like the current ratio and quick ratio, which assess the company's ability to meet short-term obligations. Profitability ratios, such as the gross profit margin and return on equity, provide insights into operational efficiency and overall financial health. Additionally, leverage ratios, like the debt-to-equity ratio, help evaluate the company's financial structure and risk level. These ratios collectively enable informed decision-making and strategic planning.
What are equivlent ratios?
when a number of ratios give the same answer after solving the ratios the ratios are said to be equivalent ratios
How are ratios classified?
Ratios are often classified using the following terms: profitability ratios (also known as operating ratios), liquidity ratios, and solvency ratios.
How do you calculate percentage of profit using tally software?
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
What ratios do you think banks are most interested in for young company?
Banks are typically most interested in liquidity ratios, such as the current ratio and quick ratio, to assess a young company's ability to meet short-term obligations. They also focus on leverage ratios, like the debt-to-equity ratio, to evaluate financial stability and risk. Additionally, profitability ratios, such as net profit margin, can provide insights into the company's potential for sustainable growth. Overall, these ratios help banks gauge the financial health and viability of startups seeking funding.
Ratios?
Ratios
TYPES OF financial statement analysis?
There are numerous financial ratios use to analyse different aspects of a company's financial performance Profitability ratios * Profitability ratios measure the firm's use of its assets and control of its expenses to generate an acceptable rate of return. * Gross margin, Gross profit margin or Gross Profit Rate * Operating margin, Operating Income Margin, Operating profit margin or Return on sales (ROS) * Profit margin, net margin or net profit margin * Return on equity (ROE) * Return on investment (ROI ratio or Du Pont ratio) * Return on assets (ROA) * Efficiency ratio * Net gearing Liquidity ratios Liquidity ratios measure the availability of cash to pay debt. * Current ratio * Acid-test ratio (Quick ratio) * Operation cash flow ratio Activity ratiosActivity ratios measure the effectiveness of the firms use of resources. * Average collection period * DSO Ratio * Average payment period * Asset turnover * Inventory turnover ratio * Receivables Turnover Ratio * Inventory conversion ratio * Inventory conversion period * Receivables conversion period * Payables conversion period Debt ratios (leveraging ratios) Debt ratios measure the firm's ability to repay long-term debt. Debt ratios measure financial leverage. * Debt ratio * Debt to equity ratio * Long-term Debt to equity (LT Debt to Equity) * Times interest-earned ratio * Debt service coverage ratio Market ratios Market ratios measure investor response to owning a company's stock and also the cost of issuing stock. * Earnings per share (EPS) * Payout ratio * Dividend cover (the inverse of Payout Ratio) * P/E ratio * Dividend yield * Cash flow ratio or Price/cash flow ratio * Price to book value ratio (P/B or PBV) * Price/sales ratio * PEG ratio
