Profitability Ratios

Return on assets or ROA measures the percentage rate of return a business gets on its assets. It is calculated by dividing the earnings before interest and tax by the total assets of the business.

ROCE or return on capital employed measures the percentage rate of return a business gets on its capital employed. It is calculated by dividing the earnings before interest and tax by the total assets less current liabilities of the business.

The net profit ratio is the profit after tax of the business expressed as a percentage of the revenue. It is calculated by dividing profit after tax by revenue.
The Net profit ratio is also called Net Margin or Net Profit Margin.

The return on sales is the operating income of the business expressed as a percentage of the revenue. It is a measure of the level of true income a business generates on its sales. It is calculated by dividing operating income by revenue. Operating income is the same as earnings before interest and tax (EBIT), otherwise called profit before interest and tax (PBIT).

The overhead ratio is the overheads of the business expressed as a percentage of the revenue (sales). It is calculated by dividing overheads by revenue.

The gross profit percentage is the gross profit (sometimes called gross margin) of the business expressed as a percentage of the revenue. It is a measure of the level of true income a business generates on its sales. It is calculated by dividing gross profit by revenue.