Profitability Ratios

Gross Profit Ratio = (Gross Profit ÷ Revenue from Operations) × 100

Shows the margin available after covering the direct cost of goods/services sold, before operating expenses.

Operating Ratio = [(Cost of Revenue from Operations + Operating Expenses) ÷ Revenue from Operations] × 100

Shows the proportion of revenue absorbed by operating costs; a lower ratio indicates better operating efficiency. Operating Ratio + Operating Profit Ratio = 100%.

Operating Profit Ratio = (Operating Profit ÷ Revenue from Operations) × 100

Shows the margin remaining from operations alone, before non-operating items, interest, and tax.

Net Profit Ratio = (Net Profit after Tax ÷ Revenue from Operations) × 100

Shows the final margin retained by the firm after all expenses, interest and tax — the most comprehensive profitability-to-sales measure.

Return on Investment (Return on Capital Employed) = (Net Profit before Interest and Tax ÷ Capital Employed) × 100, where Capital Employed = Shareholders' Funds + Long-term Debt

Shows the overall return earned on the total long-term funds (both owners' and borrowed) invested in the business, regardless of how that capital is financed.