Profitability Ratio: Measures degree of success or failure of Co/division Flashcards
1
Q
Profit margin on sales (gross margin)
A
NI/ Net sales
Measures net income generate by each dollar of sales
2
Q
Rate of return on assets
A
NI/ Avg Total Assets
Measures overall profitability of assets
3
Q
Rate of return on CS equity (Return on equity)
A
NI minus Preferred Div / Avg Common SE
Measures profitability of owners’ investment
4
Q
EPS
A
NI minus Pref Div / Weighted shares outstanding
Measures NI earned on each share of CS
5
Q
Price Earnings Ratio
A
Mkt price of Stk / EPS
Measures the ratio of the mkt price per share to EPS
6
Q
Payout Ratio
A
Cash Dividends / NI
Measures % of earning distributed in the form of cash dividends
