Technicals Stability Returns



Understanding Profitability Ratios



Profitability ratios show how effectively a company makes money and adds value for shareholders. It helps to measure and evaluate the company's ability to generate profits. These ratios take into account various components of the Income statement, balance sheet and cash flow statement to analyze how the business has performed.

For the majority of profitability ratios, a higher value in comparison to a competitor's ratio or to the same ratio from a previous period indicates the company's success. Any company therefore aims for a higher ratio, which shows that the company is doing well in terms of revenue, profits, or cash flow. The majority of creditors and investors also analyse a company's return on investment in relation to its relative level of resources and assets using profitability ratios.


ROA
ROA Ratio

The return on assets (ROA) is a commonly used profitability ratio that shows how effectively a company uses its assets to generate profit.


ROE
ROE Ratio

The Return on Equity (ROE) is a profitability metric that measures a company's ability to generate profits using its shareholder's fund.


ROIC
ROIC Ratio

Return on invested capital (ROIC) measures how well a company can convert its invested capital into profit.


ROCE
ROCE Ratio

Return On Capital Employed (ROCE) is a long-term profitability ratio that measures how efficiently a company is employing its capital to generate profit.


Gross Margin
Gross Margin

The Gross Margin ratio is the difference between revenue and the cost of goods sold (COGS) divided by the total revenue, and it is expressed as a percentage.


Operating Margin
Operating Margin

Operating Margin measures the company's revenue before deducting any interest and taxes. It is calculated by dividing Operating Earnings by Total Revenue.


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EBITDA Margin
EBITDA Margin

EBITDA Margin is the profitability ratio that measures a company's earnings before interest, taxes, depreciation, and amortization as a percentage of revenue. EBITDA is the abbreviation for Earnings before Interest, Taxes, Depreciation, and Amortization.


Net Margin
Net Margin

Net Margin indicates how much of a net profit is generated for each rupee of revenue earned and expressed as a percentage.


Asset Turnover Ratio
Asset Turnover Ratio

Asset turnover ratio is a profitability ratio that measures how efficiently a company utilizes its assets to generate revenue, and it is based on an annual basis.


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Dividend Payout Ratio
Dividend Payout Ratio

The Dividend Payout Ratio (DPR) is the percentage of the company's earnings paid out to the shareholders in the form of dividends.


Dividend Yield
Dividend Yield

A Dividend Yield is a financial ratio that measures the dividend paid by the company relative to stock price, and it is generally expressed as a percentage, which gives an estimation of the dividend's return on investment.


Dividend Per Share
Dividend Per Share

DPS or Dividend Per Share, is the amount that a company declares as a dividend for every ordinary or equity shareholder.


FCF To Revenue Ratio
FCF to Revenue

Free Cash Flow to Revenue is a performance ratio that measures how efficiently a company has converted its total revenue into free cash, and it is also known as Free Cash Flow to Sales..


CFROA
CFROA

Cash Flow Return on Assets (CFROA) is a metric that measures how efficiently a company utilizes its assets to generate operating cash flow.




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