Ratio - Edubook - Profitability ratios

3 important questions on Ratio - Edubook - Profitability ratios

What represents the profitability ratio?

Profitability ratios represent the profitability of a company. A link is made between investments and the return these could yield.

Which three things does a compnay wants to know? (profitability ratios)



  • What is the return of the capital I used to finance my own investments (equity)?
  • What are the expenses of the money I borrowed for financing investments (liabilities)?
  • What is the profitability of the equity and liabilities together?

Formula of 'ROE (after taxes)'

ROE (after taxes) = (profit after taxes) /  (average total equity) x 100%

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