subject: Profitability Ratios Definition [print this page] Introduction to profitability ratios definition:
Profitability ratio is one of the important topic in business mathematics. The definition of profitability ratio is given as the ratio used for measuring the company's profit. Mainly the profitability ratio is used for the fundamental analysis. There are three types of profitability ratios are used. By using these ratios we can find the company's income. In this article, we are going to see about the detailed description of the definition of the profitability ratios.
Explanation to Profitability Ratios Definition
The explanation for the profitability ratios definition are given below the following section,
Three types:
Gross profit margin:
Formula:
'((G.F)/(S.R))xx100'
where,
G.F = Gross Profit
S.R = Sales Revenue
Net profit margin:
Formula:
'((N.F)/(S.R))xx100'
where,
N.F = Net Profit
S.R = Sales Revenue
Return on Capital Employed (R.O.C.E):
Formula:
'((N.F)/(C.E))xx100'
where,
N.F = Net Profit
C.E = Capital Employed
Example Problems to Profitability Ratios Definition
Problem 2: Net profit = 250, Sales Revenue = 300. Find Net Profit margin.
Answer: 83.33
On this page, we hope to clear up problems that you might have with fractions and their uses in Algebra. Ratios are continually being utilized in math and make many things much easier to do. Scroll down or use the links below to start understanding ratios better!
Solving proportions
Advanced ratio problems (inferring)
Quiz on Ratios
Proportions
In this section we'll help you understand how to deal with ratios.
A fraction is also known as a ratio. For example, 3/4 is also the ratio of 3 to 4. Any statement (or equation) that says two ratios are equal is called a proportion. An important thing to remember when dealing with equal ratios is illustrated below.
3 15 4 * 15
- = -- Cross multiply.
4 20 3 * 20
4 * 15 = 3 * 20
60 = 60
You can solve for unknowns in proportions by using that process.
