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Profitability Ratio Analysis

Profitability ratio is a measure of profitability, which is a way to measure a company's performance. Some of the most commonly used profitability ratios - Profit Margin, Return on Assets (ROA) and Return on Equity (ROE). Select a ratio calculator and key in the required values to get the desired result:

    



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  1. Profit Margin Calculator
    Profit Margin Ratio is used to measure the amount of net income earned with each dollar of sales generated by comparing the net income and net sales of a company. Try now…

    How to calculate?
    Formula: Profit Margin = Net Income/Net Sales.
    This is an Income statement component; the values are commonly stated against Net Income and Net Sales (Earnings).

    Net Sales:
    Total sales less returns and bad debts.

    Net Income:
    Profit left over after deducting all its expenses (cost of goods, operational expenses, interest cost, depreciation cost, taxes and if any dividend paid).

    Example:
    Profit margin ratio for a company with a net sales income of $100,000 and net income of $10,000 is 10%. It means the company has a net income of $0.10 for each dollar it generated, or we can say that, company converted 10% of its sales into profits.
  2. Return on Assets (ROA) Calculator
    Return on Assets Ratio is used to measure, how efficiently a company can convert the money used to purchase assets into net income or profits. Try now…

    How to calculate?
    Formula: Return on Assets (ROA) = Net Income/ Total Assets.
    The values for net income can be obtained from income statement and total assets value from the balance sheet.


    Net Income:
    Profit left over after deducting all its expenses (cost of goods, operational expenses, interest cost, depreciation cost, taxes and if any dividend paid).

    Total Assets:
    Total assets are the sum of all current and noncurrent assets that a company owns.

    Example:
    Return on assets ratio for a company with net income of $60,000 and total assets of$300,000 is 20%. It means, every dollar that was invested in assets during the year produced $0.20 of net income.
  3. Return on Equity (ROE) Calculator
    Return on Equity Ratio is used to measure the company's ability to generate profits from its shareholders investments. Try now…

    How to calculate?
    Formula: Return on Equity (ROE) = Net Income/ Shareholder's Equity
    The values for net income can be obtained from income statement and total shareholder's equity value from the balance sheet.

    Net Income:
    Profit left over after deducting all its expenses (cost of goods, operational expenses, interest cost, depreciation cost, taxes and if any dividend paid).

    Total Shareholder's Equity:
    Total shareholder's equity is the value left in the company after subtracting total liabilities from total assets.

    Example:
    Return on equity ratio for a company with net income of $60,000 and total shareholder’s equity of $600,000 is 15%. It means that, $0.15 of return earned on the shareholder's equity.

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