There are many indicators that reflect a company's profitability. The most commonly used indicators are net sales profit margin, gross sales profit margin, net asset profit margin, and return on net worth.
Profitability indicators are indicators that measure a company's ability to earn profits, mainly including operating profit margin, cost and expense profit margin, surplus cash guarantee multiple, return on total assets, return on net assets and return on capital. item. In practice, listed companies often use indicators such as earnings per share, dividends per share, price-earnings ratio, and net assets per share to evaluate their profitability.
1. The profitability indicators of an enterprise include the following:
Operating net profit margin: refers to the ratio of a company’s net profit to operating income in a certain period. The higher the net sales profit margin, the stronger the company's competitiveness and profitability. Formula: Operating net profit margin = net profit/operating income
Sales gross profit margin: refers to the ratio of an enterprise's gross sales profit to sales revenue in a certain period. The higher the gross sales profit margin, the stronger the company's profitability. Formula: gross sales profit margin = (sales revenue - sales cost) / sales revenue
Cost and expense profit margin: refers to the ratio of an enterprise's profit to its cost and expense within a certain period of time. The higher the cost and expense profit margin, the better the company's cost control and the stronger its profitability. Formula: cost and expense profit margin = total profit/total cost and expense
2. What is the importance of corporate profitability:
Corporate profitability analysis is an important part of financial analysis content. Profitability refers to the ability of a company to make profits. The stronger the company's profitability, the higher the return it gives to shareholders and the greater the company's value. At the same time, the stronger the profitability, the more cash flow it brings, and the company's solvency is strengthened;
Profit is the central issue that all parties inside and outside the company are concerned about. It is the key to investors obtaining investment income and creditors. The source of funds for collecting principal and interest is a concentrated expression of the operator's operating performance and management efficiency, and is also an important guarantee for the continuous improvement of employee collective welfare facilities. Therefore, the analysis of corporate profitability is very important;
Profitability is the most important performance measure for corporate managers and a breakthrough for discovering problems and improving corporate management. For corporate managers, the purpose of corporate profitability analysis is embodied in two aspects: using profitability-related indicators to reflect and measure corporate operating performance; and discovering problems in business management through profitability analysis.