Measures that indicate how well a firm is performing in terms of its ability to generate profit. Formulae of some of the common ratios are as follows: (1) Book Value Per share: Total common (ordinary) equity ÷ Number of common (ordinary) shares issued and outstanding. (2) Dividends Per Share: Dividends paid ÷ Number of common (ordinary) shares issued and outstanding. (3) Earnings Per Share: (Net income - preferred stock or preference share interest) ÷ Number of common (ordinary) shares issued and outstanding. (4) Gross profit percentage: Total cost of sales in a period x 100 ÷ Total sales revenue for that period.
(5) Net income percentage: Net income for a period x 100 ÷ Total sales revenue for that period. (6) Operating profit percentage: Earnings before interest and taxes (EBIT) in a period x 100 ÷ Total sales revenue in the same period. (7) Return On Common equity: (Net income for a period - Dividends) ÷ (Common equity - Preferred stock). (8) Return On Investment: Net income ÷ Total assets.
Use 'profitability ratios' in a Sentence
The profitability ratios indicated positive current and future performances from the company so we decided to invest extensively in the company.
The firm was analyzing its profitability ratios of the stocks in its investment portfolio to provide a better return on its investments in order to generate more profit in the next quarter.
I wanted to know what our profitability ratios were because that would tell me how well our business was doing.
You Also Might Like...
