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    Profitability ratios measure the income or operating success of a company over a period of time. These ratios include profit margin, asset turnover, return on assets, return on equity, earnings per share, price-earnings ratio, and payout ratio. They are used to analyze a company's ability to generate profits from its resources, sales, assets, and shareholders' equity. Profitability ratios help identify how efficiently a company utilizes its assets and equity to generate income.

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    Profitability ratios measure the income or operating success of a company over a period of time. These ratios include profit margin, asset turnover, return on assets, return on equity, earnings per share, price-earnings ratio, and payout ratio. They are used to analyze a company's ability to generate profits from its resources, sales, assets, and shareholders' equity. Profitability ratios help identify how efficiently a company utilizes its assets and equity to generate income.

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    6 views10 pages

    Slide ACC309 ACC309 Slide 04

    Uploaded by

    dharmendra dclana
    Profitability ratios measure the income or operating success of a company over a period of time. These ratios include profit margin, asset turnover, return on assets, return on equity, earnings per share, price-earnings ratio, and payout ratio. They are used to analyze a company's ability to generate profits from its resources, sales, assets, and shareholders' equity. Profitability ratios help identify how efficiently a company utilizes its assets and equity to generate income.

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    PROFITABILITY RATIOS

    Ratio Analysis

    Profitability Ratios

    Measure the income or operating success of a company


    for a given period of time.
    Income, or the lack of it, affects the company’s ability to
    obtain debt and equity financing, liquidity position, and
    the ability to grow.
    Ratios include the profit margin, asset turnover,
    return on assets, return on ordinary shareholders’
    equity, earnings per share, price-earnings, and
    payout ratio.
    SO 5 Identify and compute ratios used in analyzing a
    firm’s liquidity, profitability, and solvency.
    Ratio Analysis Profitability Ratios

    Measures the percentage of each dollar of sales that results


    in net income.
    SO 5 Identify and compute ratios used in analyzing a
    firm’s liquidity, profitability, and solvency.
    Ratio Analysis Profitability Ratios

    Measures how efficiently a company uses its assets to


    generate sales.

    SO 5 Identify and compute ratios used in analyzing a


    firm’s liquidity, profitability, and solvency.
    Ratio Analysis Profitability Ratios

    An overall measure of profitability.

    SO 5 Identify and compute ratios used in analyzing a


    firm’s liquidity, profitability, and solvency.
    Ratio Analysis Profitability Ratios

    Shows how many euros of net income the company earned


    for each dollar invested by the owners.

    SO 5 Identify and compute ratios used in analyzing a


    firm’s liquidity, profitability, and solvency.
    Ratio Analysis Profitability Ratios

    A measure of the amount of net income applicable to each


    ordinary share.

    SO 5 Identify and compute ratios used in analyzing a


    firm’s liquidity, profitability, and solvency.
    Ratio Analysis Profitability Ratios

    The price-earnings (PE) ratio reflects investors’ assessments


    of a company’s future earnings.

    SO 5 Identify and compute ratios used in analyzing a


    firm’s liquidity, profitability, and solvency.
    Ratio Analysis Profitability Ratios

    Measures the percentage of earnings distributed in the form of


    cash dividends.
    SO 5 Identify and compute ratios used in analyzing a
    firm’s liquidity, profitability, and solvency.
    Ratio Analysis Profitability Ratios
    Illustration 14-27
    Summary of profitability ratios

    SO 5 Identify and compute ratios used in analyzing a firm’s liquidity,


    profitability, and solvency.

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