What Is The Profitability Ratio?

Profitability ratio refers to the ability of an enterprise to earn profits in normal operation. It is the basis for the survival and development of enterprises, and it is a very concerned indicator in all aspects.

Composition of profitability ratio

reflect

(1) net sales interest rate

Net interest rate refers to net profit and net profit.

Net sales rate = (net profit, sales revenue) * 100%

Note: this indicator reflects the net profit per yuan sales revenue, indicating sales.

(two) gross margin of sales

Gross profit margin is the percentage of gross profit in sales revenue, and gross margin refers to the difference between sales revenue and sales cost.

The formula is as follows:

Gross margin of sales is [(sales revenue - sales cost), sales revenue] * 100%

Note: gross profit margin is the initial basis of the net interest rate of enterprises, and it can not be profitable without enough gross margin.

(three) net asset interest rate

Net asset interest rate is the percentage of net profit and total assets.

Average total assets = (initial assets total + end assets total) 2

The formula for calculating net asset profit is:

Net asset interest rate = (net profit, average assets total) * 100%

The higher the index, the higher the utilization efficiency of assets. This shows that enterprises have achieved good results in increasing revenue and reducing expenditure and saving funds.

(four) return on equity

Net assets yield is the percentage of net profit and average net assets, also known as net value return rate or equity reward rate.

The formula is:

Net assets yield = net profit average net assets * 100%

Average net assets = (net assets at the beginning of the year + year-end net assets) 2

The rate of return on equity that reflects the owner's equity is highly comprehensive.