Profitability Ratio:
A class of financial metrics that are used to assess a business's ability to generate earnings as compared to its expenses and other relevant costs incurred during a specific period of time. For most of these ratios, having a higher value relative to a competitor's ratio or the same ratio from a previous period is indicative that the company is doing well.
Profitability ratios:
Cash Debt Coverage Ratio:
The cash debt coverage ratio shows the percent of debt that current cash flow can retire.
Cash Debt Coverage = (cash flow from operations - dividends) / total debt.
Cash Return on Assets Ratios:
The cash return on assets (excluding interest) contains no provision for replacing assets or future commitments.
Cash Return on Assets (excluding interest) = (cash flows from operations before interest and taxes) / total assets.
The cash return on assets (including interest) indicates internal generation of cash available to creditors and investors.
Cash Return on Assets (including interest) = (cash flow from operations) / total assets.
Cash Return to Shareholders Ratio:
The cash return to shareholders ratio indicates a return earned by shareholders.
Cash Return to Shareholders = cash flow from operations / shareholders equity
Contribution Margin and Contribution Margin Ratio
Contribution margin is the amount generated by sales to cover fixed costs.
Contribution Margin = sales - variable costs.
The contribution margin ratio indicates the percent of sales available to cover fixed costs and profits.
Contribution Margin Ratio = (sales - variable costs)/sales.
Current Return on Training and Development:
This ratio is a general indicator of the current return on training and development.
Current Return on Training and Development = increase in productivity and knowledge contribution / training costs
Gross Profit Margin Ratio (Gross Margin Ratio):
The gross profit margin ratio (or gross margin ratio) provides clues to the company's pricing, cost structure and production efficiency. The gross profit margin ratio (or gross margin ratio) is a good ratio to benchmark against competitors.
Gross Profit Margin Ratio = gross profit / sales.
Operating Margin Ratio:
The operating margin ratio determines whether the fixed costs are too high for the production volume.
Operating Margin = net profits from operations / sales.
Profit Margin Ratios:
Profit margin ratios state how much profit the company makes for every dollar of sales.
Net Profit Margin Ratio (After Tax Margin Ratio) = net profit after tax / sales.
Pretax Margin Ratio = net profit before taxes / sales.
Operating Profit Margin (Operating Margin) = net income before interest and taxes / sales.
Return on Assets Ratio:
The return on assets ratio provides a standard for evaluating how efficiently financial management employs the average dollar invested in the firm's assets, whether the dollar came from investors or creditors.
Return on Assets = net profit before taxes / total assets.
Return on Common Equity Ratio:
The return on common equity ratio shows the return to common stockholders after factoring out preferred shares.
Return on Common equity = (net profit - preferred share dividends) / (shareholders equity- preferred shares).
Return on Investment Ratio Formula, Calculation and Definition:
The return on investment ratio provides a standard return on investor's equity.
Return on Investment Ratio = net profits before tax / shareholders equity.
Return on Sales Ratio:
Return on Sales = Net Profit / Sales
Times Interest Earned Ratio:
The times interest earned ratio indicates the extent of which earnings are available to meet interest payments.
Times Interest Earned Ratio = (net income + interest) / interest.
