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Profitability Ratios

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Ratios

Profitability

Profitability

• Is the earning performance of the business and indicates its capacity to use its resources to maximise profits.

Gross Profit Ratio

• Measures profitability before expenses.

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Net Profit Ratio

• Measures profitability after all expenses have been paid.

• Calculates for every dollar in sales how much the business makes profit.

Rate of return on Shareholders' Equity

• Return on investment by owners.

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Rate of Return on Total Assets (EBIT)

• How profitable the business is compared to the assets they own.

• The higher the ratio the better is.

• Indicates if the assets the business owns, are generating revenue for the business.

Earnings per sharing ratio

• The profit earned on each share

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Price earnings ratio

• The number of times the market price per share covers profit per share

Dividend yield ratio

• The dividend received per share expressed as a percentage return on the market price per share.