Profitability Ratios Flashcards
What is the formula for Gross Profit Margin?
(Revenue − COGS) / Revenue
What does Gross Profit Margin measure?
Production efficiency
What is Operating Profit Margin?
Profit / Revenue
What does Operating Profit Margin measure?
Operational profitability
What is Net Profit Margin?
Net Income / Revenue
What does Net Profit Margin measure?
Overall profitability
What is Return of Assets (ROA)?
Net Income / Total Assets
What does Return on Assets (ROA) measure?
Asset Productivity
What is Return on Equity (ROE)?
Net Income / Shareholders’ Equity
What does Return on Equity (ROE) measure?
Equity Profitability
What is Return on Invested Capital (ROIC)?
Net Operating Profit After Taxes (NOPAT) / Total Invested Capital
What does Return on Invested Capital (ROIC) measure?
Investment Returns
