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Profitability Ratios
June 07 , 2012

Profitability ratios shows a company's overall efficiency & performance. Ratios that show margins represent the firm's ability to translate sales into profits at various stages of measurement. It includes Gross margin ratio, operating margin ratio, Net Profit margin ratio, Return on equity, Return on investment, Return on assets, Return on capital , Return on capital employed etc.

Gross Profit Margin =  Gross Profit / Net sales

Net Profit Margin =  Net Profit / Net sales

Return on Assets =  Net Income / Total assets

Return on Capital =  EBIT(1- tax rate) / Capital invested

Operating Profit Margin =  Operating Income / Net sales

Return on Capital Employed =  EBIT / Capital Employed

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