How to Calculate Profitability Ratios
What is Profitability Ratios?
Profitability ratios measure how efficiently a company generates profit relative to its revenue, assets, or equity. They are core metrics used by investors and analysts to compare companies within the same industry.
Formula
Step-by-Step Guide
- 1Gross profit margin = (Revenue − COGS) / Revenue × 100
- 2Operating profit margin = Operating profit / Revenue × 100
- 3Net profit margin = Net profit / Revenue × 100
- 4Return on Assets (ROA) = Net income / Total assets × 100
- 5Return on Equity (ROE) = Net income / Shareholders' equity × 100
Worked Examples
Frequently Asked Questions
What is Profitability Ratios?
Profitability ratios measure how efficiently a company generates profit relative to its revenue, assets, or equity. They are core metrics used by investors and analysts to compare companies within the same industry
How accurate is the Profitability Ratios calculator?
The calculator uses the standard published formula for profitability ratios. Results are accurate to the precision of the inputs you provide. For financial, medical, or legal decisions, always verify with a qualified professional.
What units does the Profitability Ratios calculator use?
This calculator works with inches. You can enter values in the units shown — the calculator handles all conversions internally.
What formula does the Profitability Ratios calculator use?
The core formula is: Gross profit margin = (Revenue − COGS) / Revenue × 100. Each step in the calculation is shown so you can verify the result manually.
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