Profitability Ratios Calculator

Analyze the profitability of a business with key financial ratios

Financial Data Input

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Company B / Period 2

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About Profitability Ratios

Return on Assets (ROA)

Measures the efficiency in generating profits with the available assets. Higher ROA indicates better asset utilization.

Return on Equity (ROE)

Quantifies the return on owners’/stockholders’ investment. Higher ROE indicates better returns for shareholders.

Gross Profit Margin

Measures how much of every dollar of sales the company makes after paying cost of goods sold. Higher margin indicates better cost control.

Operating Profit Margin

How much of every dollar of sales the company makes after paying variable costs and before taxes, interest, and preferred stock dividends.

Net Profit Margin

How much of every dollar does a company actually keep? This is the ultimate measure of profitability after all expenses.

Earnings per Share (EPS)

Earnings per share of common stock in circulation. Higher EPS indicates greater profitability on a per-share basis.

Price/Earnings (P/E) Ratio

A measure of how much investors are willing to pay per dollar of a company’s earnings. Higher P/E indicates higher growth expectations.

Profitability Ratios Calculator

Profitability ratios calculator tools are essential for business owners, investors, and financial analysts who want to understand how efficiently a company is generating profit. Profitability ratios reveal whether a company is making the most out of its assets, equity, and revenue. They also show whether the company’s stock is priced fairly compared to its earnings.

Profitability is one part of a larger financial story. Discover additional tools in our Financial Ratio Calculators index to assess liquidity, operational strength, debt management, and stock performance metrics together.

What is a Profitability Ratios Calculator?

A profitability ratios calculator is a financial tool that automatically computes key performance ratios such as:

  • Return on Assets (ROA)
  • Return on Equity (ROE)
  • Gross Profit Margin
  • Operating Profit Margin
  • Net Profit Margin
  • Earnings per Share (EPS)
  • Price-to-Earnings (P/E) Ratio

By inputting a company’s net income, assets, equity, sales, and stock details, you can quickly see how profitable the business is and compare it across different periods or against other companies.

If you are looking for a complete financial overview, you may also explore related tools like the Debt Ratios Calculator to measure financial leverage.

Why Profitability Ratios Matter

Profitability ratios give you insights beyond raw revenue or expenses. For example:

  • Efficiency: How well the company uses its assets to create profit.
  • Investor Value: Whether shareholders are receiving strong returns.
  • Sustainability: If profit margins are healthy enough to weather challenges.
  • Valuation: Whether the stock is priced too high or undervalued compared to earnings.

Together, these ratios form a clear picture of financial health, helping in decision-making for investments, lending, or internal management.

Profitability Ratios Explained with Formulas

The calculator uses standard financial formulas to give accurate results. Here are the key ratios it calculates:

1. Return on Assets (ROA)

Formula: net income ÷ total assets
This shows how efficiently a company turns its assets into profit.

2. Return on Equity (ROE)

Formula: net income ÷ shareholder’s equity
Measures how much return investors are getting for their invested capital.

3. Gross Profit Margin

Formula: gross profit ÷ sales
Shows how much of every dollar of sales remains after covering the cost of goods sold.

4. Operating Profit Margin

Formula: operating profit ÷ sales
Reveals how much profit remains after subtracting operating expenses, but before interest and taxes.

5. Net Profit Margin

Formula: net income ÷ sales
Indicates the percentage of revenue that ends up as actual profit.

6. Earnings per Share (EPS)

Formula: net income ÷ common stock outstanding
Tells investors how much profit is assigned to each share of stock.

7. Price-to-Earnings Ratio (P/E)

Formula: market price per share ÷ (net income ÷ common stock outstanding)
Shows how much investors are willing to pay per dollar of earnings.

For a deeper dive into operational efficiency, you can also check the Operations Ratios Calculator.

How to Use the Profitability Ratios Calculator

The calculator allows you to input either one set of company data or two sets for comparison. Here’s how it works:

  1. Single Company / One Period:
    • Enter values in Column A (net income, assets, equity, etc.).
    • Press calculate to get all available profitability ratios.
  2. Two Companies or Two Periods:
    • Fill both Column A (primary) and Column B (secondary).
    • The calculator will compute ratios for each and also show the percentage change between them.
  3. Rounding Options:
    • Ratios are rounded according to the chosen significant figures setting.
    • Percentage changes are always calculated to four significant figures.

This comparison functionality makes the tool perfect for side-by-side evaluation of competitors or year-over-year performance.

Key Input Definitions

To use the calculator effectively, it helps to understand each input field:

  • Net Income: Profit after deducting interest and taxes.
  • Total Assets: The sum of current and long-term assets.
  • Shareholder’s Equity: Total value invested by shareholders.
  • Gross Profit: Revenue minus cost of goods sold.
  • Sales: Total revenue before expenses.
  • Operating Profit: Gross profit minus operating expenses.
  • Common Stock Outstanding: Number of shares currently circulating.
  • Market Price per Share: Current trading value of one share.

If you want to check short-term financial health alongside profitability, try the Liquidity Ratios Calculator.

Ratio Definitions at a Glance

RatioFormulaPurpose
Return on Assets (ROA)net income ÷ total assetsMeasures efficiency in generating profits with assets.
Return on Equity (ROE)net income ÷ shareholder’s equityShows return on investors’ money.
Gross Profit Margingross profit ÷ salesReveals profit after cost of goods sold.
Operating Profit Marginoperating profit ÷ salesProfitability after operating costs.
Net Profit Marginnet income ÷ salesFinal profitability after all costs.
Earnings per Share (EPS)net income ÷ common stock outstandingProfit allocated per share.
Price/Earnings (P/E) Ratiomarket price per share ÷ (net income ÷ common stock outstanding)Indicates stock valuation relative to earnings.

When to Use Profitability Ratios

Profitability ratios are most useful when:

  • Comparing Companies: For investors deciding between stocks.
  • Analyzing Performance Over Time: Tracking progress year-over-year.
  • Making Strategic Decisions: Identifying strengths and weaknesses in a business model.
  • Evaluating Stock Valuation: Determining if shares are fairly priced.

When used together with tools like the Stock Ratios Calculator, you get an even clearer picture of investment potential.

The Profitability Ratios Calculator is a powerful way to understand how well a company is performing. Whether you’re a business owner, student, or investor, knowing how to interpret these ratios helps you make smarter decisions. By comparing results across companies or time periods, you can uncover trends, spot opportunities, and avoid financial pitfalls.

Profitability is only one part of financial analysis, but it’s the most telling. Pairing it with other calculators for debt, liquidity, operations, and stock ratios ensures a complete financial health check.

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Zaheer, Ahmed “Profitability Ratios Calculator” at https://calculatorcave.com/calculators/financial/profitability-ratios-calculator/ from CalculatorCave, https://calculatorcave.com – Online Calculators