Profitability Ratios Calculator
Calculate ROA, ROE, profit margins, EPS and P/E ratio. Compare two periods or companies side by side.
Enter values in Column A for one period or company. Use Column B to compare a second period or company. Leave fields blank to skip that ratio.
| Ratio | A | B | Change |
|---|
Profitability Ratio Formulas
Profitability ratios measure how effectively a company generates earnings relative to its revenue, assets, and equity.
| Ratio | Formula | What It Measures |
|---|---|---|
| Return on Assets (ROA) | Net Income / Total Assets | Profit generated per dollar of assets |
| Return on Equity (ROE) | Net Income / Shareholder Equity | Return on shareholder investment |
| Gross Profit Margin | Gross Profit / Sales | Revenue kept after cost of goods sold |
| Operating Profit Margin | Operating Profit / Sales | Revenue kept after operating expenses |
| Net Profit Margin | Net Income / Sales | Revenue kept after all expenses and taxes |
| Earnings Per Share (EPS) | Net Income / Shares Outstanding | Profit allocated to each share |
| Price/Earnings Ratio (P/E) | Market Price / EPS | Amount paid per dollar of earnings |
Understanding Profitability Ratios
Profitability ratios are financial metrics that measure how well a company converts revenue, assets, and equity into profits. Investors, analysts, and business owners use these ratios to evaluate performance, compare competitors, and make investment decisions.
Return on Assets Explained
Return on assets measures how efficiently a company uses its total asset base to generate net income. A higher ROA means the business is more productive with the resources it controls. ROA is most useful when comparing companies within the same industry.
Return on Equity and Shareholders
Return on equity shows how much profit shareholders receive for each dollar invested. ROE is a critical metric for stock investors because it directly reflects the return on their capital. Many analysts use 15% ROE as a minimum threshold for high quality businesses.
Gross vs Operating vs Net Margin
Gross profit margin measures efficiency at the production level. Operating profit margin adds the effect of overhead and selling costs. Net profit margin is the final metric after all expenses, interest, and taxes. Moving from gross to net margin reveals how much of revenue is consumed by each layer of business expenses.
How to Use the Two Column Comparison
The two column design lets you compare the same company across two time periods, or compare two different companies side by side. The change column shows the percentage increase or decrease between A and B for every ratio where both values are available.
Frequently Asked Questions
Return on assets equals net income divided by total assets. With $500,000 net income and $2,500,000 in total assets, ROA is 20%. A higher ROA means more profit is generated from each dollar of assets.
Return on equity equals net income divided by shareholders equity. It shows how much profit a company generates with shareholder investment. An ROE of 15% or higher is generally considered strong for established companies.
Earnings per share equals net income divided by common shares outstanding. With $1,000,000 net income and 500,000 shares outstanding, EPS is $2.00 per share.
The P/E ratio tells you how much investors pay per dollar of company earnings. A P/E of 20 means investors pay $20 for every $1 of annual earnings. Higher P/E ratios suggest higher growth expectations or overvaluation.
Gross profit margin equals gross profit divided by sales. A 60% gross margin means the company retains $0.60 of every sales dollar after paying for goods or services sold.