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Profitability Ratio

Profitability ratios are a class of financial metrics that are used to assess a business's
ability to generate earnings compared to its expenses and other relevant costs incurred
during a specific period of time. For most of these ratios, having a higher value relative to a
competitor's ratio or relative to the same ratio from a previous period indicates that the
company is doing well.
https://www.investopedia.com/terms/p/profitabilityratios.asp#ixzz5EQrYaFeD

1. Net Profit Margin:


Net profit margin is the percentage of revenue left after all expenses have been
deducted from sales. The measurement reveals the amount of profit that a
business can extract from its total sales.

(Net profits ÷ Net sales) x 100 = Net profit margin

2015 2016 2017


Net Profit Margin 7.32 6.43 7.55

Net Profit Margin


8
7
6
5
4
3
2
1
0
2015 2016 20167

The net profit margin is intended to be a measure of the overall success of a business. A
high net profit margin indicates that a business is pricing its products correctly and is
exercising good cost control. Net profit of BBC from 2015-2016 experienced a downfall.
In 2016, net profit margin is 12,1% decreased compared with 2015.The reason for this
decline is in 2016, the cost of goodsold increased. In 2017, the net profit margin was
highest among those in 3 latest years due to an movement of net profit (81,281-
97,329). It implied that BBC pricing its product correctly and higher after-tax profit over
its total revenue
2. ROA (Return on Assets)
Return on assets (ROA) is an indicator of how profitable a company is relative to its total
assets. ROA gives a manager, investor, or analyst an idea as to how efficient a company's
management is at using its assets to generate earnings. Return on assets is displayed as
a percentage and its calculated as:

ROA = Net Income / Total Assets


https://www.investopedia.com/terms/r/returnonassets.asp#ixzz5ER1B2DVI

2015 2016 2017


ROA 9,03 7,94 9,01

Return on Assets
10

0
2015 2016 2017

The profit percentage of assets varies by industry, but in general, the higher the ROA the
better. For this reason it is often more effective to compare a company's ROA to that of
other companies in the same industry or against its own ROA figures from previous periods.
Falling ROA is almost always a problem, but investors and analysts should bear in mind that
the ROA does not account for outstanding liabilities and may indicate a higher profit level
than actually derived. In 2015-2016, ROA of BBC suffered a fall by 1,09% . That presented
the lower earnings its asset generated . However, in 2017, ROA increased up to 9,01 which
means BBC more effectively used it asset in working process

3. ROE Return on Equity)


A measure of how well a company uses shareholders' funds to generate a profit. Return on
equity (ROE), is a financial ratio that measures the return generated on
stockholders’/shareholders’ equity, the book or accounting value of
stockholders’/shareholders’ equity which reflects the accumulation over time of amounts
received by the company from stock/share issues plus the profits/earnings retained by the
company,

Return on Equity = Net Income/Shareholder's Equity


http://lexicon.ft.com/Term?term=return-on-equity--roe

2015 2016 2017


ROE 12.74 11.15 12.38

Return on Equity
14

12

10

0
2015 2016 2017

ROE is more than a measure of profit; it's a measure of efficiency. A rising ROE suggests
that a company is increasing its ability to generated profit. It also indicates how well a
company's management is deploying the shareholders' capital. In other words, the higher
the ROE the better. From 2015-2016, due to lower net income, ROE and ROA of BBC
dropped that caused dissatisfaction for shareholders. In 2017ROA moved upward to 12,38%
that illustrated higher return on money that was gained from shareholders’ investment.