Profitability Ratios are that helps us understand whether the company is able to generate enough sales relative to its expenses during a specified period. Most commonly used by Financial Analysts, Profitability Ratio anlaysis measure and evaluate a company's earning generation ability relative to its revenue and expenses during a specific time period. Profit is essentially whatever is left from the revenue after deducting all the associated expenses.
Profitability ratios types include gross profit margin, operating profit margin, net profit margin, EBITDA Margin, Earnings per share, ROE, ROCE, ROA, Contribution margin and more.
Profitability Ratios Formula
Profit Margin ratio reflects net margin on profit on the total sales after deducting all expenses covering interest and taxation too.
EBIT vs EBITDA | Top Differences | Examples | Calculation
EBIT defines any company’s profit including, all expenditures just leaving income tax and interest expenditures. Whereas, EBITDA measure is good to be used for analyzing and comparing profitability between firms and businesses.
EBITDAR is a calculation of earnings of the company before netting interest, taxes and depreciation & amortization and rent/restructuring cost of the company and it is used to determine its actual operating performances without taking effects of its financial and investment decisions.