Scribd
Upload
84 views8 pages

Gross Profit Margin or Gross Profit Rate: Profitability Ratios

This document defines and provides examples of various types of ratios used to evaluate company profitability, liquidity, activity, debt, and market performance. It outlines 12 profitability ratios like gross profit margin and return on equity. It also lists liquidity ratios like current and acid-test ratios, activity ratios like average collection period, 4 debt ratios including debt-to-equity, and 9 market ratios such as P/E ratio, dividend yield, and price-to-book value. The ratios are used to analyze a company's financial health and investment potential.

Uploaded by

srik1011
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
84 views8 pages

Gross Profit Margin or Gross Profit Rate: Profitability Ratios

This document defines and provides examples of various types of ratios used to evaluate company profitability, liquidity, activity, debt, and market performance. It outlines 12 profitability ratios like gross profit margin and return on equity. It also lists liquidity ratios like current and acid-test ratios, activity ratios like average collection period, 4 debt ratios including debt-to-equity, and 9 market ratios such as P/E ratio, dividend yield, and price-to-book value. The ratios are used to analyze a company's financial health and investment potential.

Uploaded by

srik1011
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 8

Profitability ratios

Profitability ratios measure the company's use of its assets and control of its expenses to generate

an acceptable rate of return

1. Gross profit margin or Gross Profit Rate

OR

2. Operating Income Margin, Operating profit margin or Return on sales (ROS)

Note: Operating income is the difference between operating revenues and operating

expenses, but it is also sometimes used as a synonym for EBIT and operating profit.[10]

This is true if the firm has no non-operating income. (Earnings before interest and taxes /

Sales[11][12])

3. Profit margin, net margin or net profit margin

4. Return on equity (ROE) [13]


5. Return on investment (ROI ratio or Du Pont Ratio)[6]

6. Return on assets (ROA)[14]

7. Return on assets Du Pont (ROA Du Pont)[15]

8. Return on Equity Du Pont (ROE Du Pont)

9. Return on net assets (RONA)

10. Return on capital (ROC)

11. Risk adjusted return on capital (RAROC)

OR
12. Return on capital employed (ROCE)

Note: this is somewhat similar to (ROI), which calculates Net Income per Owner's Equity

Cash flow return on investment (CFROI)

Efficiency ratio

Net gearing

Basic Earnings Power Ratio[16]

[edit] Liquidity ratios

Liquidity ratios measure the availability of cash to pay debt.

Current ratio (Working Capital Ratio)[17]


Acid-test ratio (Quick ratio)[17]

Cash ratio[17]

Operation cash flow ratio

Activity ratios (Efficiency Ratios)

Activity ratios measure the effectiveness of the firms use of resources.

Average collection period[3]

Degree of Operating Leverage (DOL)

DSO Ratio.[18]

Average payment period[3]

Asset turnover[19]
Stock turnover ratio[20][21]

Receivables Turnover Ratio[22]

Inventory conversion ratio[4]

Inventory conversion period (essentially same thing as above)

Receivables conversion period

Payables conversion period

Cash Conversion Cycle

Inventory Conversion Period + Receivables Conversion Period - Payables

Conversion Period

[edit] Debt ratios (leveraging ratios)


Debt ratios measure the firm's ability to repay long-term debt. Debt ratios measure financial

leverage.

Debt ratio[23]

Debt to equity ratio[24]

Long-term Debt to equity (LT Debt to Equity)[24]

Times interest-earned ratio / Interest Coverage Ratio[24]

OR

Debt service coverage ratio

[edit] Market ratios

Market ratios measure investor response to owning a company's stock and also the cost of

issuing stock.
Earnings per share (EPS)[25]

Payout ratio[25][26]

OR

Dividend cover (the inverse of Payout Ratio)

P/E ratio

Dividend yield

Cash flow ratio or Price/cash flow ratio[27]

Price to book value ratio (P/B or PBV)[27]

Price/sales ratio
PEG ratio

Other Market Ratios

EV/EBITDA

EV/Sales

Cost/Income ratio

Sector-specific ratios

EV/capacity

EV/output

You might also like