Profitability Ratios

Profitability

Profitability ratios provide information on the amount of income from each dollar of sales.

Return on Equity (ROE): Net profit after tax______ (or return on ordinary shareholders’ funds ROSF) Average Share holder’s equity

Reveals how much profit a company earned in comparison to the total amount of shareholder equity.

2010 = 102/(190 + 184)/2 x 100 = 54.5%

2011= 99/(184 + 175)/2 x100 = 55.2%

2012= 9/(175+200)/2 x100 = 4.8%

Gross Profit Margin= Gross Income

sales

2010: 391/220 = 0.44:1 (44%)

2011: 546/350 =0.36:1 (36%)

2012: 569/430 =0.24:1 (24%)

GPM is the ratio of gross profit for sales revenue. The percentage by which gross profit exceeds production costs.

The higher the percentage, the more the company retains on each dollar of sales to service its other costs and obligations, the better the company is thought to control its costs.

Return on Assets: Net profit before interest & taxation

Average total assets

ROA expresses the relationship between the net profit generated by the business and the assets owned by the business.

2010: 124/(450+562)/2 x100 = 17%

2011: 135/(562+611)/2 x 100 =23%

2012: 49(611+681)/2 x100 =7.6%

Net Profit: Net profit before interest and taxation x100

sales

This ratio relates to the net profit for the period to the sales during the period.

2010: 124/391 x100= 31.7%

2011: 135/546 x100= 24.7%

2012: 49/569 X100= 8.6%

Liquidity: The ability for a company to repay its debts & is usually shown by looking at the working capital of the business.

Working capital = Current Assets – Current Liabilities

2009: 155 – 123= 32

2010: 253 – 118= 135

2011: 284 – 106= 178...