Fixed asset turnover: This ratio measures the utilization of all the company’s fixed assets (ie plant and equipment); it measures how many sales are generated by each dollar of fixed assets. The formula is:
Operating Profitability ratio:
Gross profit margin:A trend analysis of this ratio shows the firm’s relative cost price position, it shows the basic cost structure of the firm. The gross profit margin helps to determine the percentage of net sales that eventually become gross profit. The formula for gross profit margin is:
Operating profit margin: To derive the operating profit, we say Gross profit – Sales, general and admin expenses. Operating income is the amount of revenue left over after accounting for all the expenses necessary to keep the business running. This expenses deducted include cost of goods sold, rent, utilities, wages etc. The formula for the operating profit margin is:
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