Profitability Ratios
Autor: dexjbc • January 3, 2016 • Essay • 9,254 Words (38 Pages) • 834 Views
Profitability Ratios
Profitability is the ability of the business to generate profit. Profitability ratios measure the ability of the business to generate profit in relation to sales, investments, assets, equities, or ordinary shares outstanding.
Return on Sales
Formula: Profit ÷ Net Sales
2016 | 2017 | 2018 | 2019 | 2020 | |
Net Income | 2,500,647.79 | 2,925,423.82 | 3,386,921.85 | 3,862,280.28 | 4,425,645.84 |
Sales | 6,717,857.14 | 7,406,437.50 | 8,165,780.44 | 9,002,996.91 | 9,925,023.08 |
Return on sales | 0.37 | 0.39 | 0.41 | 0.43 | 0.45 |
This shows that the profit percentage per peso sales is increasing each year thus it is favorable to the entity.
Return on Totals Assets
Formula: Profit ÷ Average Total Assets
Net Income | 2,500,647.79 | 2,925,423.82 | 3,386,921.85 | 3,862,280.28 | 4,425,645.84 |
Total Assets Beg. | 2,137,572.97 | 3,570,953.47 | 4,963,098.33 | 6,331,199.74 | |
Total Assets End | 2,137,572.97 | 3,570,953.47 | 4,963,098.33 | 6,331,199.74 | 7,763,182.59 |
Total Asset Average | 2,137,572.97 | 2,854,263.22 | 4,267,025.9 | 5,647,149.035 | 7,047,191.165 |
Return on total asets | 1.17 | 1.02 | 0 .79 | 0.68 | 0 .63 |
This shows that the assets of the business are well employed by the management and these contributed in the overall profitability of the entity throughout the years.
Return on Equity
Formula: Profit ÷ Average Equity
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