📈Profitability Ratios
Profit Margin
Net Income ÷ Net Sales × 100 = Profit Margin %
What It Means
How much profit you keep from each dollar of sales.
✓Higher % = more profit per dollar of sales
Example
Net Income:$20,000
Net Sales:$200,000
$20,000 ÷ $200,000 × 100
Profit Margin = 10%
→ You keep $0.10 of every sales dollar as profit
Related Formulas
Gross Margin Ratio
Gross Profit ÷ Net Sales × 100 = Gross Margin %
Return on Assets (ROA)
Net Income ÷ Average Total Assets × 100 = ROA %
Return on Equity (ROE)
Net Income ÷ Average Stockholders' Equity × 100 = ROE %
Earnings Per Share (EPS)
(Net Income - Preferred Dividends) ÷ Weighted-Average Common Shares = EPS
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