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Profitability Ratio

Profitability ratios are used to assess a business's ability to generate earnings compared to its expenses. There are several types of profitability ratios, including operating margin, non-operating revenue ratio, return on total assets, and return on equity. These ratios measure profits from operations, how reliant a company is on non-operating income, how effectively assets generate income, and earnings relative to shareholders' equity.

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340 views3 pages

Profitability Ratio

Profitability ratios are used to assess a business's ability to generate earnings compared to its expenses. There are several types of profitability ratios, including operating margin, non-operating revenue ratio, return on total assets, and return on equity. These ratios measure profits from operations, how reliant a company is on non-operating income, how effectively assets generate income, and earnings relative to shareholders' equity.

Uploaded by

reenieja
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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PROFITABILITY RATIO

used to assess a business's ability to generate earnings as compared to its expenses and other relevant costs incurred during a specific period of time. Show a companys overall efficiency and performance.

Types of profitability ratios:


Operating Margin
Measures profits earned from the organizations main line of business

Non-operating Revenue Ratio


To find out how dependant the organization is on patient related net income

Return On Total Assets


measures of how well an entity is using its assets to produce more income i.e. measures how much profit is earned for each dollar invested in assets

Return On Equity
Shows what the shareholders have earned on their investment in the entity during the accounting period

Types of profitability ratios


Operating Margin
Operating income Total operating revenue

Non-operating Revenue Ratio


Non-operating revenue Total operating revenue

Return On Total Assets


Net profit after taxes Total asset

x 100%

Return On Equity (Return On Net Assets)


Net profit after taxes Shareholders equity

x 100%

Parkway Hospital Group Sdn Bhd Statement of Operation as at Dec-09

RM
Revenue Cost of sale Gross Profit Expenses Salaries Marketing Expenses Utilities & Maintenance Bills Depreciation for the year Total Expenses Operating income Other income Profit before taxes Tax Net profit 1,230.00 870.00 1,530.00 410.00

RM
12,590.00 7,140.00 19,730.00

4,040.00 15,690.00 200.00 15,890.00 (760.00) 15,130.00

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