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    10 Profitability Ratios

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    irfantanjung
    This document discusses 10 key financial profitability ratios: gross profit margin, net profit margin, return on assets, return on equity, earnings per share, price to earnings ratio, operating profit margin, return on investment, debt-to-equity ratio, and current ratio. For each ratio, the document provides the definition, formula, and an explanation of what a higher or lower ratio indicates about the company's profitability.

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    10 Profitability Ratios

    Uploaded by

    irfantanjung
    33 views12 pages
    This document discusses 10 key financial profitability ratios: gross profit margin, net profit margin, return on assets, return on equity, earnings per share, price to earnings ratio, operating profit margin, return on investment, debt-to-equity ratio, and current ratio. For each ratio, the document provides the definition, formula, and an explanation of what a higher or lower ratio indicates about the company's profitability.

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    This document discusses 10 key financial profitability ratios: gross profit margin, net profit margin, return on assets, return on equity, earnings per share, price to earnings ratio, operating profit margin, return on investment, debt-to-equity ratio, and current ratio. For each ratio, the document provides the definition, formula, and an explanation of what a higher or lower ratio indicates about the company's profitability.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    33 views12 pages

    10 Profitability Ratios

    Uploaded by

    irfantanjung
    This document discusses 10 key financial profitability ratios: gross profit margin, net profit margin, return on assets, return on equity, earnings per share, price to earnings ratio, operating profit margin, return on investment, debt-to-equity ratio, and current ratio. For each ratio, the document provides the definition, formula, and an explanation of what a higher or lower ratio indicates about the company's profitability.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 12

    10

    Financial Profitabilty
    Ratios
    With Expanations & Formulas

    Mohamed Samir Rashed CMA , IFRS


    APRIL2023 Mohamed Samir
    1
    Gross
    Profit
    Margin

    Defination

    This ratio measures the percentage of


    sales that exceed the cost of goods sold.

    Formula

    (Gross Profit / Revenue) x 100

    Explanation

    A higher gross profit margin indicates


    that a company is generating more
    revenue than it spends on producing
    goods or services.

    Mohamed Samir Rashed Follow


    CMA , IFRS me
    2
    Net
    Profit
    Margin

    Defination

    This ratio measures the percentage of


    revenue that remains after all expenses
    have been deducted, including taxes and
    interest.
    Formula

    (Net Profit / Revenue) x 100

    Explanation

    A higher net profit margin indicates


    that a company is generating more
    profit relative to its revenue.

    Mohamed Samir Rashed Follow


    CMA , IFRS me
    3
    Return on
    Assets
    (ROA)

    Defination

    This ratio measures the efficiency of a


    company's use of its assets to generate
    profits.
    Formula

    (Net Profit / Total Assets) x 100

    Explanation

    A higher ROA indicates that a company


    is generating more profit relative to its
    investment in assets.

    Mohamed Samir Rashed Follow


    CMA , IFRS me
    4
    Return on
    Equity
    (ROE)

    Defination

    This ratio measures the return that


    shareholders receive on their
    investment in a company.
    Formula

    (Net Profit / Shareholders' Equity) x


    100
    Explanation

    A higher ROE indicates that a company


    is generating more profit per dollar of
    shareholder investment.

    Mohamed Samir Rashed Follow


    CMA , IFRS me
    5
    Earnings
    per Share
    (EPS)

    Defination

    This ratio measures the amount of


    profit generated per outstanding share
    of common stock.
    Formula

    (Net Income - Preferred Dividends) /


    Average Common Shares Outstanding
    Explanation

    A higher EPS indicates that a company


    is generating more profit per share of
    common stock.

    Mohamed Samir Rashed Follow


    CMA , IFRS me
    6
    Price to
    Earnings
    (P/E)
    Ratio

    Defination

    This ratio measures the market's


    expectation of a company's future
    earnings potential.
    Formula

    Market Price per Share / Earnings per


    Share (EPS)
    Explanation

    A higher P/E ratio indicates that


    investors expect a company to generate
    higher earnings in the future.

    Mohamed Samir Rashed Follow


    CMA , IFRS me
    7
    Operating
    Profit
    Margin

    Defination

    This ratio measures the percentage of


    revenue that remains after deducting all
    operating expenses, but before interest
    and taxes.
    Formula

    (Operating Profit / Revenue) x 100

    Explanation

    A higher operating profit margin


    indicates that a company is generating
    more profit from its core business
    operations.

    Mohamed Samir Rashed Follow


    CMA , IFRS me
    8
    Return on
    Investment
    (ROI)

    Defination

    This ratio measures the return that a


    company generates on its investment in
    a specific project or initiative.

    Formula

    (Net Profit from Investment /


    Investment Cost) x 100
    Explanation

    A higher ROI indicates that a company


    is generating more profit per dollar of
    investment.

    Mohamed Samir Rashed Follow


    CMA , IFRS me
    9
    Debt-to-
    Equity
    Ratio

    Defination

    This ratio measures the amount of debt


    that a company has relative to its
    shareholder equity.

    Formula

    Total Debt / Shareholders' Equity

    Explanation

    A higher debt-to-equity ratio indicates


    that a company is more reliant on debt
    financing, which can impact
    profitability.

    Mohamed Samir Rashed Follow


    CMA , IFRS me
    10
    Current
    Ratio

    Defination

    This ratio measures a company's ability


    to pay off its current liabilities using its
    current assets.

    Formula

    Current Assets / Current Liabilities

    Explanation

    A higher current ratio indicates that a


    company is better able to meet its
    short-term financial obligations, which
    can impact profitability.

    Mohamed Samir Rashed Follow


    CMA , IFRS me
    Mohamed Samir Rashed
    CMA , IFRS

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