profitability ratios

Question 1

what is profitablity ratio or why are they computed?

Answer 1

profitability refers to the financial performance of a business. the efficiency of business is measured by profiatbilty

Question 2

what are the profitability ratios?

Answer 2

• operating profit ratio
• operating ratio
  -gross profit ratio
  -net profit ratio
  -roi or return on capital employed ratio

Question 3

gross profit ratio

Answer 3

gp/rfo ^ 100

Question 4

whats rfo

Answer 4

rfo is the revenue earned by an organisation from its operating activities

Question 5

why is gp ratio computed?

Answer 5

to find the effieciency with which production and or purchase operations and selling operations are carried out

Question 6

operating ratio

Answer 6

operating cost/rfo ^ 100
EXPRESSED IN %
IT is ocmputed to find out the operational efficiency of the business. it shows the percentage of rfo that is being absorbed by cogs and opeeating expenses

Question 7

operating profit ratio

Answer 7

operating profit/rfo ^ 100
to find operating profit= rfo- operating cost
computed to detemine operational efficiency of the business

Question 8

net profit ratio

Answer 8

np after tax/rfo ^ 100
helps to find the overall efficiency of the busienss

Question 9

roi

Answer 9

aka return on capital employed
np before int and tax/cap employed ^ 100
its computed to find overall performance or profitability of the enterprise and how effiecitently resources r used by the business