Section 3
Profitability Ratios
Book
Version 3
By Boundless
By Boundless
Boundless Finance
Finance
by Boundless
5 concepts
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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.
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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.
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Return on Total Assets
The return on assets ratio (ROA) measures how effectively assets are being used for generating profit.
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Basic Earning Power (BEP) Ratio
The Basic Earning Power ratio (BEP) is Earnings Before Interest and Taxes (EBIT) divided by Total Assets.
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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.