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4
Profitability Ratio
Profitability ratios are financial metrics used by analysts and investors to
measure and evaluate the ability of a company to generate income (profit)
relative to revenue, balance sheet assets, operating costs, and shareholders’
equity during a specific period of time. They show how well a company
utilizes its assets to produce profit and value to shareholders.
A. Return Ratios
Return ratios represent the company’s ability to generate returns for its
shareholders. It typically compares a return metric versus certain
balance sheet items.
Return on Equity
Return on Assets
Return on Capital Employed
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