Meaning of profitability ratio = profitability ratio refers to the it shows the performance or efficiency of the company by utilized the resources like assets . the ans is written by % on the basis of sales and investment . the company want to generate more and more profit by utilizing the resources. the main objectives of the company to earn more profit by selling more product in the market.
formula of profitability ratio
1.Gross profit ratio =gross profit / sales
2 .Net profit ratio =Net profit /sales
3 . operating profit ratio = operating profit / sales
4 . Return on assets = NPAT + INTEREST / Total assets
5 . Return on equity = NPAT / share holder equity
6. Earning per share (EPS) = Net profit – preferred Dividend / No of share outstanding
7. Price earning ratio (P/E ratio) = market price of share / EPS
8. Dividend payout ratio = Dividend per share (D.P.S) /Earning per share( E.P.S)
9. Retention ratio = Retained earning /Net income
