Profitability Ratios
Profitability ratios help to understand the revenue generation ability of a company from its operations. These ratios are key indicators of a company's efficiency and overall performance.
Why Profitability Ratios?
Investors invest to gain profit. Therefore, identifying profitable companies is crucial. Profitability ratios help investors evaluate how well a company generates profit relative to different benchmarks such as its assets, equity, or revenue.
Key Profitability Ratios
Net Profit Margin
Percentage of revenue left after all expenses have been deducted.
Return on Investment (ROI)
Measures the gain or loss generated on an investment relative to the amount of money invested.
Return on Equity (ROE)
Measures financial performance by dividing net income by shareholders' equity.