Profitability ratios are used to evaluate a company's ability to make money within a given period of time compared to its expenses and other costs associated with income. This ratio reflects the end result of the company. 

Profitability Ratio

Profitability represents the final performance of a company i.e. how profitable a company is. It also represents how profitable the owner’s funds have been utilized in the company.


Types of Profitability Ratio with formula 

Net Income / Shareholder’s Equity

Earnings Per Share

Return on Equity

 Net Profit ÷ Total no of shares outstanding

Amount Distributed to Shareholders ÷ No of Shares outstanding

Price Earnings Ratio

Dividend Per Share

Market Price of Share ÷ Earnings per share

Net Operating Profit ÷ Capital Employed × 100 Capital Employed

Return on Asset

Return on Capital Employed

Net Profit ÷ Total Assets

Gross Profit ÷ Sales × 100

Net Profit

Gross Profit

Net Profit ÷ Sales × 100