Profitability ratio:
Profitability ratios measure a company’s ability to generate profits from its operations.
1.Gross Profit Margin = (Revenue – Cost of Goods Sold) / Revenue x 100%
2.Net Profit Margin = Net Profit / Revenue x 100%
3.Return on Equity = Net Income / Shareholders’ Equity x 100%
Valuation ratio:
Valuation ratios assess a company’s relative value in the market.
1.Price-to-Earnings (P/E) Ratio = Market Price per Share / Earnings per Share
2.Earnings Yield = Earnings per Share / Market Price per Share x 100%
3.Price-to-Book (P/B) Ratio = Market Price per Share / Book Value per Share
