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Profitability Ratios (Question Examples: (Is the business making a profit?…
Profitability Ratios
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Profitability Ratios:
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Operating Profit Margin:
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Net Profit Margin:
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Net profit margin of business should be compared with other competitors in same market, and over time.
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Measuring Profit
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In Relative terms- The profit earned as a proportion of sales achieved or investment made. E.g. £50,000 profit from £500,000 of sales is a 10% profit margin.
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Profit broken down into: Revenues - Cost of Sales = Gross Profit - Expenses and Overheads = Operating Profit
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