What's it: Net profit margin is a profitability ratio to measure how much profit is left (in percent) after the company has covered all its costs, including interest expense and taxes. We calculate it by dividing net profit by revenue.

# Profitability Ratio

## Cash Flow Ratios: Examples, Formulas, and Interpretations

What's it: Cash flow ratios are financial ratios calculated by comparing the metrics in the cash flow statement with other items in the financial statements. For example, cash from operations (CFO) is a commonly used metric. It is an

## EBIT Margin: Calculation and Interpretation

What's it: EBIT margin is a profitability ratio to measure how efficiently a company converts its revenue into profit before paying interest and taxes. We calculate it by dividing EBIT by revenue. A high ratio is better because the

## NOPAT Margin: Formula, Calculation, and Interpretation

What's it: NOPAT margin is a profitability ratio to measure how efficiently a company generates profit from its core business after accounting for expenses paid as taxes. We calculate it by dividing NOPAT by revenue. We use it as an

## Return on Assets (ROA): Calculation and Interpretation

What's it: Return on assets (ROA) is a profitability ratio to measure how well a company uses its assets to generate profits. This ratio tells us about the returns the company gets on its assets. We calculate it by dividing net profit

## EBIAT Margin: Formula, Calculation, and Interpretation

What's it: EBIAT margin is a profitability ratio to measure how efficiently a company generates profit from all its activities before paying interest expense while taking taxes into account. We calculate it by dividing EBIAT by

## Return on Common Equity (ROCE): Calculation and Interpretation

What's it: Return on common equity (ROCE) is a profitability ratio for measuring the return to common stockholders on their invested capital. It is an alternative to return on equity (ROE) by isolating returns to preferred

## Operating ROA: Formula, Calculation, and Interpretation

What's it: Operating ROA is a profitability ratio to measure how well a company is using its assets to generate profits from its core business. We calculate it by dividing operating profit by total assets.Operating ROA provides

## Return on Invested Capital (ROIC): Calculation and Interpretation

What's it: Return on invested capital (ROIC) is a profitability ratio to measure how much profit is generated for every dollar invested in the company. We calculate it by dividing net income by the total invested capital, expressed as

## DuPont Analysis: Formula, Decomposition, Interpretation, Pros, Cons

What's it: DuPont analysis is an approach to breaking down the ratio of return on equity (ROE) into several specific ratios. It helps us know why a company's ROE is superior (inferior) to competitors. If we compare the components from year to

## Pretax Profit Margin: Its Calculation and Interpretation

What's it: Pretax profit margin is a profitability ratio to measure how successfully a company converts revenue into profit before part of it is paid out as tax. We calculate it by dividing profit before tax (pretax profit) divided by

## Profitability Ratio: Formulas, Types, and Examples

What's it: Profitability ratio is a financial ratio to measure the company's ability to generate profit. Profitability ratios are a key driver of a firm's value and hence, an important factor for valuing its share price. As a result,

## Return on Equity (ROE): Calculation and Interpretation

What's it: Return on equity (ROE) is a profitability ratio to measure how high the return is on the invested equity capital. We get it by dividing net income by total equity, expressed as a percentage. Also known as return on owners'

## Operating Profit Margin: Formula, Calculation and Interpretation

What's it: Operating profit margin is a profitability ratio to measure the percentage of profit a company generates from its core business. It tells us how much profit the company makes after paying operating expenses but before paying

## Gross Profit Margin: Formula, Calculation, and Interpretation

What's it: Gross profit margin or gross margin is a financial ratio to measure a company's profitability, calculated by dividing gross profit by revenue. We get gross profit by subtracting the cost of goods sold from

## EBITDA Margin: Formula, Calculation, and Interpretation

What's it: EBITDA margin is a profitability ratio to measure how much a company profits from recorded revenue after adjusting for non-cash items but before paying interest and taxes. We calculate it by dividing EBITDA by revenue,