Financial Statement Analysis
- Profitability Ratios
- Profit Margin
- Gross Profit Margin Formula
- Operating Profit Margin Formula
- Net Profit Margin Formula
- EBIDTA Margin
- Earnings Per Share
- Basic EPS
- Diluted EPS
- Basic EPS vs Diluted EPS
- Return on Equity (ROE)
- Return on Capital Employed (ROCE)
- Return on Invested Capital (ROIC)
- Return on Total Assets (ROA)
- Return on Average Capital Employed
- Capital employed Employed
- Return on Average Assets (ROAA)
- Return on Average Equity (ROAE)
- Return on Assets Formula
- Return on Equity Formula
- DuPont Formula
- Net Interest Margin Formula
- Earnings Per Share Formula
- Diluted EPS Formula
- Contribution Margin Formula
- Revenue Per Employee Ratio
- Operating Leverage
- EBIT vs EBITDA
- Capital Gains Yield
- Tax Equivalent Yield
- LTM Revenue
- Operating Expense Ratio Formula
- Overhead Ratio Formula
- Capacity Utilization Rate Formula
- Total Expense Ratio Formula
What are Profitability Ratios?
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.
Profit Margin ratio reflects net margin on profit on the total sales after deducting all expenses covering interest and taxation too.
Gross Profit Margin Formula
This profitability ratio analysis is used to dictate how much profit a company makes just by deducting the cost of goods sold from the revenue.
Operating Profit Margin Formula
Operating Profit margin is a profitability ratio analysis that is avidly used by the investors.
Net Profit Margin Formula
This profitability ratio Formula is used by the investors to find out how much percentage of net profit a company has earned at the end of the year.
This is a profitability ratio that calculates how much of the EBITDA (earnings before interest depreciation and amortization) is generated as a percentage of Sales.
Earnings Per Share
Earnings Per Share is a most commonly used corporate profitability measure for publicly traded firms
Basic EPS is a simple profitability ratio, which is used to find out the earnings of a company per every common share.
Diluted EPS is a profitability ratio, which measures the amount of income each share will receive if all of the convertible securities were exercised.
Basic EPS vs Diluted EPS
Basic EPS helps to find out the earnings of the company per equity share whereas, Diluted EPS helps to find out the company per convertible share.
Return on Equity (ROE)
ROE is a profitability ratio formula that measures how much returns on generated from shareholder’s investments
Return on Capital Employed (ROCE)
Return on capital employed is a profitability ratio formula which tells how a company is using its capital.
Return on Invested Capital (ROIC)
This profitability ratio formula is used to understand how the firm is using its invested capital i.e. equity and debt to generate profit at the end of the day.
Return on Total Assets (ROA)
This profitability ratio formula is used to compare the earnings of a business to the total assets invested in it.
Return on Average Capital Employed
ROACE helps investors find out how much return they may get from the investments they would make in the company.
Capital Employed Formula is calculated to assess the total resources employed for acquisition of profits.
Return on Average Assets (ROAA)
ROAA formula helps to find out how a company is utilizing its assets.
Return on Average Equity (ROAE)
ROAE is used by many investors to find how much net income is being generated by using the shareholders’ equity
Return on Assets Formula
ROA Formula shows the profit earned as a percentage from its Average Total Assets for the period by a company.
Return on Equity Formula
ROE Formula is the most common formula used by the shareholder's to find out the return on their investment.
Dupont formula helps us to understand the Return on Equity (ROE).
Net Interest Margin Formula
Net Interest Margin ratio is used to find out how much interest an investor receives over how much she pays out.
Earnings Per Share Formula
EPS formula is used to find out how much of net income each share has earned during the year.
Diluted EPS Formula
Diluted Earnings per Share EPS (DPS) are a measurement of profit.
Contribution Margin Formula
Contribution Margin formula is used to understand how much a company’s net sales will contribute to the fixed expenses and the net profit after covering the variable expenses.
Revenue Per Employee Ratio
Revenue Per Employee Ratio helps as a measure of average financial productivity for each employee of the firm.
Operating leverage is a measure of how sensitive the operating income is to the change in revenues.
EBIT vs EBITDA
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.
Capital Gains Yield
Capital gains yield formula is used to find know how much return we will get only on the basis of the appreciation or depreciation of a stock.
Tax Equivalent Yield
Tax Equivalent Yield formula will help you compare the yield between a tax-free investment and a taxed investment.
LTM stands for the last twelve months. Last twelve months revenue can also be called as TTM revenue (Trailing Twelve Months).
Operating Expense Ratio Formula
We get an operating expense ratio (OER) When we compare the cost of operation with the revenue generated.
Overhead Ratio Formula
In Overhead Formula, we take the operating expenses into account and compare the expenses with the total income that can’t be attributed directly to the production of goods and services.
Capacity Utilization Rate Formula
Capacity utilization is used to assess a company’s operational efficiency. This ratio also measures the realized potential output.