Key Financial Ratios and Formulas for Business Analysis

Posted by on Jan 13, 2025 in Financial and Actuarial Economics | 0 comments

Key Financial Ratios and Formulas

Profitability Ratios

  • Operating Profit Margin (OPM): EBIT / Sales
  • Return on Sales (ROS) or Net Profit Margin (NPM): Net Income (NI) / Sales
  • Return on Assets (ROA): EBIT / Assets = OPM x Asset Turnover (Sales / Assets)
  • Return on Equity (ROE): NI / Equity
  • Return on Investment (ROI): NOPAT / Capital = EBIT(1-T) / (Debt + Equity)
  • Gross Margin: (Sales – COGS) / Sales
  • Gross Margin (excluding depreciation and amortization): EBIT / Sales

Leverage Ratios

  • Degree of Operating Leverage
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