Profit Shares

Profit Shares

Profit Shares

Profitability analysis is vital for your business - you are able to conduct a simple analysis by applying profitability ratios. Here are four types of profitability ratios. Learn how they are calculated and what they indicate for your business' financial performance.

Profitability Margins

Firstly, a gross profit ratio indicates the amount you are making over sales. Sales or revenue does not necessarily indicate that your business if profitable. Your costs may be eating away at your profit margin. The calculation of the profit margin is by dividing (sales - cost of goods sold (cogs)) by sales.

This profit ratio indicates the total margin available to cover operating expenses and yield a profit.