Comprehensive Guide to Profitability Ratios and Financial Performance Analysis

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Last updated 4:15 AM on 10/9/26
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12 Terms

1
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Gross Profit Margin
Gross ProfitNet Sales\frac{\text{Gross Profit}}{\text{Net Sales}}
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Operating Income Margin
Operating IncomeNet Sales\frac{\text{Operating Income}}{\text{Net Sales}}
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Net Profit Margin
Net Income Before Noncontrolling Interest, Equity Income and Nonrecurring ItemsNet Sales\frac{\text{Net Income Before Noncontrolling Interest, Equity Income and Nonrecurring Items}}{\text{Net Sales}}
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Total Asset Turnover
Net SalesAverage Total Assets\frac{\text{Net Sales}}{\text{Average Total Assets}}
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Operating Asset Turnover
Net SalesAverage Operating Assets\frac{\text{Net Sales}}{\text{Average Operating Assets}}
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Sales to Fixed Assets
Net SalesAverage Net Fixed Assets (Exclude Construction in Progress)\frac{\text{Net Sales}}{\text{Average Net Fixed Assets (Exclude Construction in Progress)}}
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Return on Assets (ROA)
Net Income Before Noncontrolling Interest and Nonrecurring ItemsAverage Total Assets\frac{\text{Net Income Before Noncontrolling Interest and Nonrecurring Items}}{\text{Average Total Assets}}
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Return on Operating Assets
Operating IncomeAverage Operating Assets\frac{\text{Operating Income}}{\text{Average Operating Assets}}
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DuPont Return on Operating Assets

Operating Income Margin×Operating Asset Turnover=(Operating IncomeNet Sales)×(Net SalesAverage Operating Assets)\text{Operating Income Margin} \times \text{Operating Asset Turnover} = \left(\frac{\text{Operating Income}}{\text{Net Sales}}\right) \times \left(\frac{\text{Net Sales}}{\text{Average Operating Assets}}\right)

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Return on Investment (ROI)
Net Income Before Noncontrolling Interest and Nonrecurring Items+[Interest Expense×(1−Tax Rate)]Average (Long-Term Liabilities+Equity)\frac{\text{Net Income Before Noncontrolling Interest and Nonrecurring Items} + [\text{Interest Expense} \times (1 - \text{Tax Rate})]}{\text{Average (Long-Term Liabilities} + \text{Equity)}}
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Return on Total Equity (ROTE)
Net Income Before Nonrecurring Items−Dividends on Redeemable Preferred StockAverage Total Equity\frac{\text{Net Income Before Nonrecurring Items} - \text{Dividends on Redeemable Preferred Stock}}{\text{Average Total Equity}}
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Return on Common Equity (ROCE)
Net Income Before Nonrecurring Items−Preferred DividendsAverage Common Equity\frac{\text{Net Income Before Nonrecurring Items} - \text{Preferred Dividends}}{\text{Average Common Equity}}