Profitability ratios can be determined on the basis of either sales or investments.
1)Â Â Related to sales:
a)Â Â Profit margin [gross & net]:- It measures the relationship between profit & sales of a firm.
b)Â Â Expenses ratio: – It measures the relationship between expenses like administration, selling & distribution, financial etc & the sales of the firm.
2)Â Â Related to investments:-
a)Â Â Return on investments
i)Â Â Â Â Return on assets [compare net profits & assets].
ii) Return on capital employed [compare profits & capital employed]
ii)  Return on shareholder’s equity [measure the returns on owner’s funds]
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