This document provides definitions and formulas for calculating various profitability ratios, including: - Gross profit margin, which measures a company's gross profit as a percentage of total sales. An example calculation shows a GPM of 35.56%. - Operating profit margin, which measures operating income as a percentage of total sales. An example shows an OPM of 22.22%. - Net profit margin, which measures net income as a percentage of total sales. An example shows an NPM of 18.22%. - Several ratios are provided to measure returns, including return on assets, return on equity, and return on sales. Formulas and example calculations are given for each.

1. WELCOME
PROFITABILITY RATIO

2. Presented By
Muhammad Rassel Hossain
Id: 163-14-715
Rajib Sarker
Id:163-14-710
Israt Jahan Nitu
Id:121-11-338

3. Gross Profit Margin
Gross profit margin is a company's total sales revenue minus its cost of goods sold
(COGS), divided by total sales revenue, expressed as a percentage. The higher the
percentage, the more the company retains on each dollar of sales, to service its
other costs and debt obligations
Gross Profit Margin = Gross Profit/Net Sales * 100
GPM = Rev. – Exp./ Net Sales*100
GPM = 2250-1450/2250*100 = 35.56%

4. Operating Profit Margin
Operating profit margin is a margin ratio used to measure a company's pricing
strategy and operating efficiency. Operating profit margin is a measurement of what
proportion of a company's revenue is left over after paying for variable costs of
production such as wages, raw materials, etc
Operating Profit Margin = Operating Income / Net Sales * 100
OPM = EBIT/Net Sales*100
OPM = (410+90)/2250*100 = 22.22%

5. Net profit margin
Net profit margin is the percentage of revenue remaining after all operating
interest, taxes and preferred stock dividends (but not common stock dividends) have
been deducted from a company's total revenue.
Net profit margin = net income/ revenue*100
NPM = 410/2250*100 = 18.22%

6. Pretax margin
pretax margin is a company’s earning before tax as a percentage of total sales and
revenues. Pretax margin reflects the effects on profitability and other non-operating
income. If a companies pretax margin is increasing the amount of non-operating
income is also increasing.
Pretax margin = EBT / revenue * 100
PM = 410/2250*100 = 18.22%

7. Return on Assets(ROA)
Return on assets (ROA) is an indicator of how profitable a company is
relative to its total assets. ROA gives an idea as to how efficient
management is at using its assets to generate earnings.
Return on assets(ROA)=net income/average total assets *100
ROA = 410/(3510/2)*100 = 23.36%

8. Return on Assets(ROA)
Return on assets(ROA)=net income + interest exp.(1-tax rate)/average total assets
*100
ROA = 410+90(1-0)/(3510/2)*100
ROA = 500/1755*100 = 28.49%

9. Return on Equity
company generates with each dollar of shareholders' equity Return on equity (ROE)
is a measure of profitability that calculates how many dollars of profit. ROE is
sometimes called "return on net worth. Return on equity measures how much a
company makes for each dollar that investors put into it.
Return on Equity = Net Income / Shareholder Investment * 100
ROE= 410/(1500+410)*100=21.47%

10. Return on sales
Return on sales (ROS) is a ratio used to evaluate a company's operational efficiency;
ROS is also known as a firm's operating profit margin. This measure provides insight
into how much profit is being produced per dollar of sales.
Return on sales = Net Income / sales * 100
ROS = 410 / 2250 * 100=18.22%

11. THANK YOU