Profitability ratios are those which measure the profitability of the company in relation to the sales or investments it has made during an accounting year. Here is list of profitability ratios –

1. Gross profit margin ratio – Gross profit/Net sales*100

2. Operating Profit ratio – Operating profit/Net sales*100, where operating profit is (gross profit – operating cost)

3. Net Profit ratio – Net profit/ Net sales*100

4. Return on capital employed – Net profit/Capital employed*100

5. Return on Equity – Profit after tax – preference dividend/Equity shareholders fund*100

6. Return on Total Assets – Profit after tax/Total Assets*100

7. Contribution Margin Ratio – (sales – variable costs)/sales

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