Profitability Ratios
The profitability of an endeavor depends not only on the absolute profits generated, but also on the assets that must be employed to generate those profits. Profitability ratios can be used to determine a company’s efficiency on both counts. The higher the profitabilty the better.
The major profitability ratios are:
- Profit margins (common size ratios)
- Return on assets
- Return on equity
The Intelligent Investor: The Classic Text on Value Investing
Financial Statement Analysis: A Practitioner's Guide, 3rd Edition
Managing Investment Portfolios: A Dynamic Process (CFA Institute Investment Series)
[...] on assets (ROA) is a profitability ratio that demonstrates a company’s ability to generate a return for all of its investors, whether [...]
February 8th, 2007 at 1:26 pm