Profitability Ratio

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:-

Gross Revenue

Net sales

OR

Net Sales-COGS

Net Sales

• Operating margin, Operating Income Margin, Operating profit margin or Return on sales (ROS):-

Operating Income

Net Sales

• Profit margin, net margin or net profit margin:-

Net Income

Net Sales

• Return on equity (ROE):-

Net Income

Average Shareholders Equity

• Return on investment (ROI ratio or Du Pont ratio):-

Net Income

Average Owners Equity

• Return on assets (ROA):-

Net Income

Total Assets

• Return on assets Du Pont (ROA Du Pont):-

(Net Income / Net Sales ) x (Net Sales / Total assets )

• Return on Equity Du Pont (ROE Du Pont):-

( Net Income / Net Sales ) x ( Net Sales / Average Assets ) x (Average Assets/ Average Equity )

• Return on net assets (RONA):-

Net Income

Fixed Assets + Working Capital

• Return on capital (ROC):-

Net Operating Profit – Adjusted taxes

Owners Equity

• Risk adjusted return on capital (RAROC):-

Expected Return

Economic Capital

OR

Expected Returns

Value of Risk

• Return on capital employed (ROCE):-

Net Income

Capital Employed

• Cash flow return on investment (CFROI):-

Cash Flow

Market Recapitalisation

• Efficiency ratio:-

Non-Interest Income

Net-Interest Income -Non-Interest Income