1. Profitability Indicator Ratios: Introduction
  2. Profitability Indicator Ratios: Profit Margin Analysis
  3. Profitability Indicator Ratios: Effective Tax Rate
  4. Profitability Indicator Ratios: Return On Assets
  5. Profitability Indicator Ratios: Return On Equity
  6. Profitability Indicator Ratios: Return On Capital Employed

By Richard Loth (Contact | Biography)

This section of the tutorial discusses the different measures of corporate profitability and financial performance. These ratios, much like the operational performance ratios, give users a good understanding of how well the company utilized its resources in generating profit and shareholder value.

The long-term profitability of a company is vital for both the survivability of the company as well as the benefit received by shareholders. It is these ratios that can give insight into the all important "profit".

In this section, we will look at four important profit margins, which display the amount of profit a company generates on its sales at the different stages of an income statement. We'll also show you how to calculate the effective tax rate of a company. The last three ratios covered in this section - Return on Assets, Return on Equity and Return on Capital Employed - detail how effective a company is at generating income from its resources.

To find the data used in the examples in this section, please see the Securities and Exchange Commission's website to view the 2005 Annual Statement of Zimmer Holdings.

Profitability Indicator Ratios: Profit Margin Analysis

Related Articles
  1. Investing

    A Look At Corporate Profit Margins

    Take a deeper look at a company's profitability with the help of profit margin ratios.
  2. Investing

    The Difference Between Gross and Net Profit Margin

    To calculate gross profit margin, subtract the cost of goods sold from a company’s revenue; then divide by revenue.
  3. Investing

    Understanding Profit Metrics: Gross, Operating and Net Profits

    Rather than relying solely on net profit figures to evaluate a company's performance, seasoned investors will often look at gross profit and operating profit as well.
  4. Investing

    Biggest Services Sector Movers for June 22, 2012

    The market is currently up, with the Nasdaq up 0.5%, the S&P 500 rising 0.3% and the Dow climbing 0.5%. The Services sector (IYC) is up 0.2%, underperforming the market overall. The biggest movers ...
  5. Investing

    Basic Materials Stocks Making Big Moves on June 27, 2012

    The Nasdaq is trading up 0.7%, the S&P 500 has climbed 0.7% and the Dow has increased 0.6% on a good day for the market so far. The basic materials sector is the category of stocks that accounts ...
  6. Investing

    Profit Metrics: Gross, Operating & Net Profits

    In addition to net profit, most analysts look at a company’s gross profit and operating profit to gauge performance.
  7. Investing

    Is Net Income The Same As Profit?

    Net income and profit both deal with positive cash flow, but there are important differences between the two concepts.
Frequently Asked Questions
  1. Depreciation Can Shield Taxes, Bolster Cash Flow

    Depreciation can be used as a tax-deductible expense to reduce tax costs, bolstering cash flow
  2. What schools did Warren Buffett attend on his way to getting his science and economics degrees?

    Learn how Warren Buffett became so successful through his attendance at multiple prestigious schools and his real-world experiences.
  3. How many attempts at each CFA exam is a candidate permitted?

    The CFA Institute allows an individual an unlimited amount of attempts at each examination.Although you can attempt the examination ...
  4. What's the average salary of a market research analyst?

    Learn about average stock market analyst salaries in the U.S. and different factors that affect salaries and overall levels ...
Trading Center