The main Profitability Ratio commonly used overseas has the following indicators.
●Return on Sales
●Return on Assets, ROA
●Return on Equity, ROE
Return on Sales
The most common indicator to determine the profitability of Western companies. Return here means the dividend source for investors and it is Net Profit after Taxes. More than 5% becomes a standard.
<Calculation formula>
Net Profit / Sales = Return on Sales (%)
Return on Assets、ROA
It is an indicator that shows how effectively a company's assets are being used to make profits. The higher the ratio, the better the soundness and profitability of the company. In the West, 10% or more is considered as a standard for high profit.
<Calculation formula>
Net Profit / Assets = Return on Assets (%)
Return on Equity, ROE
It is an indicator that shows how effectively shareholders' and investors' capital is being used to make a profit. In particular, it is an indicator that is emphasized in the stock market.
The higher the ratio, the better the soundness and profitability of the company. In the West, 20% or more is considered as a standard of an excellent company.
<Calculation formula>
Net Profit / Net Worth = Return on Equity (%)
