Profitability Ratios are also known as indicators of return and profitability. Profitability ratios measure profit (outputs) to resources (inputs). The purpose is to evaluate the success of achieving the organization’s objectives, while taking into account investment.
Ratios are based on the basic formula: Profitability = Profit / Invested capital
In practicenere are the most often used following ratios:
- Return on Assets (ROA)
- Return on Capital Employed (ROCE)
- Return on Sales (ROS)
- Return on Equity (ROE)
Related terms, methods and analytical techniques:
- Assets
- Cash Flow
- DuPont Analysis
- Financial Analysis
- Inventory Optimization
- Liabilities & Equity
- Profit categories
- Profit
- Return
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