profitability ratio

Profitability Ratio

Any ratio that measures a company's ability to generate cash flow relative to some metric, often the amount invested in the company. Profitability ratios are useful in fundamental analysis which investigates the financial health of companies. An example of a profitability ratio is the return on investment which is the amount of revenue an investment generates as a percentage of the amount of capital invested over a given period of time. Other examples include return on sales, return on equity, and return on common stock equity.

profitability ratio

A comparison of two or more financial variables that provide a relative measure of a firm's income-earning performance. Profitability ratios are of interest to creditors, managers, and especially owners. Compare return on common stock equity, return on equity, return on investment, return on sales. See also common-size statement, gross profit margin, net profit margin.
References in periodicals archive ?
The profitability ratio (net profit margin) is calculated as net income divided by total revenue.
It added that its investment will stand the test of time, given CORAR-AG's strong reputation in the market and positive profitability ratio.
This trend in the profitability ratio is perhaps due to the expansion in the customer base as the number of branches increased in the post amalgamation period, thereby generating more revenue for the banks.
73 Profitability ratio Gross profit margins Percent 17.
If returns hit the profitability ratio, the process should be repeated.
Analysts traditionally have considered the return on investment ratio to be the key profitability ratio.
Notwithstanding the declining trend, IB's operating profitability ratio remains strong, underpinned by a wide net interest margin, a good non-interest income base and low operating costs.
The operating profitability ratio has risen over the last four years (notwithstanding a dip in 2014) due to the general improvement in margins and strong growth in fees and commissions.
The Bank's ROAA and operating profitability ratio are solid.
The Bank has consistently reported very strong earnings for many years, and both ROAA (return on average assets) and the operating profitability ratio remained high in 2014, and were well above the peer group average.
Both ROAA and the operating profitability ratio have been better than the peer group average in recent years.