7 types of Profitability Ratios every investor should know!💸

A Detailed thread🧵⤵️

#investing #finance

A Profitability Ratio is a type of ratio which helps investors to evaluate a company’s ability for generating income profit in relation to its revenue, operating costs, balance sheet assets & equity shareholders during a particular period of time.

Higher Profitability Ratios generally show the ability of the company to generate profits & cashflows.

There are 7 ratios which we can use while analysing any company:⤵️

1⃣. Return on Equity

It measures a company's annual return or net income divided by the value of its shareholders' total Equity.

In simpler words, it measures the profit made on every 1 rupee of shareholders' Equity.

2⃣. Dividend per share

This profitability ratio shows the amount of dividend that is distributed to its shareholders by the company. The high ratio shows that the company has surplus cash.