HEALTH

Profitability Ratios

The following ratios are commonly used to analyze profitability. Note that each ratio compares net income to some other financial aspect of the company. Because each ratio reveals something different about a company's income, they are best used in tandem so that a broad understanding of a company's profitability can be obtained.   

 

Profitability Ratio                                                                   Relationship    

Profit Margin                                                                          Income to Sales

Return on Equity                                                                    Income to Stockholder’s Equity

Return on Assets                                                                     Income to Total Assets

Earnings per Share                                                                  Income to Shares Outstanding

Price to Earnings                                                                     Stock Price to Income

 

· Choose a company to evaluate. Select three of the ratios shown above and calculate the performance being sure to include the components of the formula.

· Provide a clear discussion of what the results tell you about the financial health of the organization. Were you aware of the company’s performance in these areas?

· Explain three facts that you learned about the company.

· The final paragraph (three or four sentences) of your initial post should summarize the one or two key points that you are making in your initial response. Your main post must be two to three substantive paragraphs 150-200 total words and include at least two APA-formatted citations/references.