Technicals Stability Returns

Understanding Profitability Ratios

Profitability Ratios are excellent indicators to gauge the ability of a company to generate profits using its current resources and making sales.

These ratios take into account various components of the Income statement and balance sheet to analyze how the business has performed.

Profitability Ratios are useful and popular financial metrics that are used by analysts or investors to measure how profitable a company is.

A Higher Ratio of the particular company compared to its peers or previous years indicates that the company's performance is good in generating profit.

Some of the key ratios are -

1. ROA (Return On Assets) Ratio

2. ROE (Return on Equity) Ratio

3.ROIC (Return on Invested Capital) Ratio

4. ROCE (Return on Capital Employed) Ratio

5. Operating Margin

6. Net Margin

7.EBITDA (Earning before Interest, Tax, Depreciation and Amortization) Margin

8.Asset Turnover Ratio

9. Free Cash Flow to Revenue Ratio

10. Dividend Payout Ratio

11. CFROA (Cash Flow Return on Asset) Ratio