profit ratios

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  • profitability ratios
    • profit margins
      • Gross profit margin
        • the fraction of every pound spent by customers not used to make a product
        • gross profit/sales
      • shows how much profit is left after costs
    • net profit margin
      • fraction of every pound a customer spends that the business keeps
      • net profit/sales
    • RETURN ON CAPITAL EMPLOYED-profit to capital ratio
      • measures how the business turns invested money into net profit
      • profit is made in proportion to the capital that has been invested
        • a high ROCE is good for investors
          • ROCE= net profit / capital employed

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