Profitability Ratios Flashcards
1
Q
Gross margin percentage
A
(sales - COGS)/ sales
Measures percentage of each sales dollar that remains after recovering the COGS
2
Q
Profit margin
A
Net income/sales
Measures overall profitability after all expenses including COGS, expenses and taxes.
Measures so called bottom line
3
Q
Return on assets (ROA)
A
Net income/average total assets
Measures how effectively assets are used to generate profits
4
Q
Return on equity (ROE)
A
Net income/average equity
Measures the profits earned for each dollar invested in equity
