Section 3
Profitability Ratios
Book
Version 3
By Boundless
By Boundless
Boundless Finance
Finance
by Boundless
5 concepts
Operating Margin
The operating margin is a ratio that determines how much money a company is actually making in profit and equals operating income divided by revenue.
Profit Margin
Profit margin measures the amount of profit a company earns from its sales and is calculated by dividing profit (gross or net) by sales.
Return on Total Assets
The return on assets ratio (ROA) measures how effectively assets are being used for generating profit.
Basic Earning Power (BEP) Ratio
The Basic Earning Power ratio (BEP) is Earnings Before Interest and Taxes (EBIT) divided by Total Assets.
Return on Common Equity
Return on equity (ROE) measures how effective a company is at using its equity to generate income and is calculated by dividing net profit by total equity.