Brian Feroldi on LinkedIn: 14 Profit Ratios every investor should know: 💸 Accounting is the… | 58 comments (2024)

14 Profit Ratios every investor should know: 💸Accounting is the language of business.Level up your business & investing skills by memorizing these ratios:1: Gross Margin➡️What: The percentage of revenue that is translated into gross profit.🟰 Formula: Gross Profit / Sales2: EBITDA Margin➡️What: The percentage of sales that turns into profit before interest, taxes, depreciation, and amortization are subtracted.🟰 Formula: EBITDA / Sales3: Operating Margin➡️What: The percentage of sales that turn into operating income.🟰 Formula: Operating Income / Sales4: EBIT Margin➡️What: The percentage of sales that turns into profit before interest & taxes are subtracted.🟰 Formula: Earnings Before Interest & Taxes / Sales5: EBT Margin (Pre-Tax Margin)➡️What: Percentage of sales that turn into operating income.🟰 Formula? Earnings Before Taxes / Sales6: Net Profit Margin➡️What: Percentage of sales that remains as profit after all costs are subtracted.🟰 Formula: Net Income / Sales7: Free Cash Flow Margin➡️What: The percentage of sales translated into free cash flow.🟰 Formula: Free Cash Flow / Sales8: Earnings Per Share (EPS)➡️What: How much money a company makes for each share outstanding.🟰 Formula: Net Income / Shares Outstanding9: Return On Assets (ROA)➡️What: How much profit a company generates from its total assets.🟰 Formula: Net Income / Total Assets10: Return On Equity (ROE)➡️What: Measures how profitable a company is in relation to its equity (the money shareholders have invested in the business).🟰 Formula: Net Income / Equity11: Return On Invested Capital (ROIC)➡️What: Shows you how efficiently a company is allocating capital.🟰 Formula: NOPAT / Total Invested Capital12: Return On Capital Employed (ROCE)➡️What: Measures the profitability of a company and the efficiency with which it uses its capital.🟰 Formula: EBIT / Long-Term Debt + Equity13: Free Cash Flow Conversion➡️What: Measures how much earnings are translated into free cash flow🟰 Formula: Free Cash Flow / Net Income14: Owner's Earnings➡️What: Measures how much cash can be taken out of the business and given to owners🟰 Formula: Net Income + (Depreciation & Amortization) +/- Non Cash Charges - Maintenance Capex +/-Changes in working capitalWhat ratios do you track before making an investment? Let me know in the comments section below!-----------Hi 👋 - thanks for reading!________➕ Follow meNafees Ul Hassan ✨Virtual Bookkeeping and Ecom Expert✨for more content like this.________#entrepreneur#finance#business#bookkeeping#accounting#professionalgrowth#personalgrowthjourney#bookkeepingservices#accountant#bookkeeper#growthmindset#trendingtopic#balancesheet#financialadviser#financialanalysis#financialcheatsheet#cashflow#financialstatements#corporate

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14 Profit Ratios every investor should know: 💸Accounting is the language of business.Level up your business & investing skills by memorizing these ratios:1: Gross Margin➡️What: The percentage of revenue that is translated into gross profit.🟰 Formula: Gross Profit / Sales2: EBITDA Margin➡️What: The percentage of sales that turns into profit before interest, taxes, depreciation, and amortization are subtracted.🟰 Formula: EBITDA / Sales3: Operating Margin➡️What: The percentage of sales that turn into operating income.🟰 Formula: Operating Income / Sales4: EBIT Margin➡️What: The percentage of sales that turns into profit before interest & taxes are subtracted.🟰 Formula: Earnings Before Interest & Taxes / Sales5: EBT Margin (Pre-Tax Margin)➡️What: Percentage of sales that turn into operating income.🟰 Formula? Earnings Before Taxes / Sales6: Net Profit Margin➡️What: Percentage of sales that remains as profit after all costs are subtracted.🟰 Formula: Net Income / Sales7: Free Cash Flow Margin➡️What: The percentage of sales translated into free cash flow.🟰 Formula: Free Cash Flow / Sales8: Earnings Per Share (EPS)➡️What: How much money a company makes for each share outstanding.🟰 Formula: Net Income / Shares Outstanding9: Return On Assets (ROA)➡️What: How much profit a company generates from its total assets.🟰 Formula: Net Income / Total Assets10: Return On Equity (ROE)➡️What: Measures how profitable a company is in relation to its equity (the money shareholders have invested in the business).🟰 Formula: Net Income / Equity11: Return On Invested Capital (ROIC)➡️What: Shows you how efficiently a company is allocating capital.🟰 Formula: NOPAT / Total Invested Capital12: Return On Capital Employed (ROCE)➡️What: Measures the profitability of a company and the efficiency with which it uses its capital.🟰 Formula: EBIT / Long-Term Debt + Equity13: Free Cash Flow Conversion➡️What: Measures how much earnings are translated into free cash flow🟰 Formula: Free Cash Flow / Net Income14: Owner's Earnings➡️What: Measures how much cash can be taken out of the business and given to owners🟰 Formula: Net Income + (Depreciation & Amortization) +/- Non Cash Charges - Maintenance Capex +/-Changes in working capital.

14 Profit Ratios every investor should know: 💸Accounting is the language of business.Level up your business & investing skills by memorizing these ratios:1: Gross Margin➡️What: The percentage of revenue that is translated into gross profit.🟰 Formula: Gross Profit / Sales2: EBITDA Margin➡️What: The percentage of sales that turns into profit before interest, taxes, depreciation, and amortization are subtracted.🟰 Formula: EBITDA / Sales3: Operating Margin➡️What: The percentage of sales that turn into operating income.🟰 Formula: Operating Income / Sales4: EBIT Margin➡️What: The percentage of sales that turns into profit before interest & taxes are subtracted.🟰 Formula: Earnings Before Interest & Taxes / Sales5: EBT Margin (Pre-Tax Margin)➡️What: Percentage of sales that turn into operating income.🟰 Formula? Earnings Before Taxes / Sales6: Net Profit Margin➡️What: Percentage of sales that remains as profit after all costs are subtracted.🟰 Formula: Net Income / Sales7: Free Cash Flow Margin➡️What: The percentage of sales translated into free cash flow.🟰 Formula: Free Cash Flow / Sales8: Earnings Per Share (EPS)➡️What: How much money a company makes for each share outstanding.🟰 Formula: Net Income / Shares Outstanding9: Return On Assets (ROA)➡️What: How much profit a company generates from its total assets.🟰 Formula: Net Income / Total Assets10: Return On Equity (ROE)➡️What: Measures how profitable a company is in relation to its equity (the money shareholders have invested in the business).🟰 Formula: Net Income / Equity11: Return On Invested Capital (ROIC)➡️What: Shows you how efficiently a company is allocating capital.🟰 Formula: NOPAT / Total Invested Capital12: Return On Capital Employed (ROCE)➡️What: Measures the profitability of a company and the efficiency with which it uses its capital.🟰 Formula: EBIT / Long-Term Debt + Equity13: Free Cash Flow Conversion➡️What: Measures how much earnings are translated into free cash flow🟰 Formula: Free Cash Flow / Net Income14: Owner's Earnings➡️What: Measures how much cash can be taken out of the business and given to owners🟰 Formula: Net Income + (Depreciation & Amortization) +/- Non Cash Charges - Maintenance Capex +/-Changes in working capitalWhat ratios do you track before making an investment? Let me know in the comments section below!-----------P.S. Want to go deeper into analyzing financial statements? Join me for a FREE webinar on 12/19/2023: The Investor's Guide To Financial Statements. RSVP here (it's free!): https://lnkd.in/g3q5T3Bn

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14 Profit Ratios every investor should know: 💸Accounting is the language of business.Level up your business & investing skills by memorizing these ratios:1: Gross Margin➡️What: The percentage of revenue that is translated into gross profit.🟰 Formula: Gross Profit / Sales2: EBITDA Margin➡️What: The percentage of sales that turns into profit before interest, taxes, depreciation, and amortization are subtracted.🟰 Formula: EBITDA / Sales3: Operating Margin➡️What: The percentage of sales that turn into operating income.🟰 Formula: Operating Income / Sales4: EBIT Margin➡️What: The percentage of sales that turns into profit before interest & taxes are subtracted.🟰 Formula: Earnings Before Interest & Taxes / Sales5: EBT Margin (Pre-Tax Margin)➡️What: Percentage of sales that turn into operating income.🟰 Formula? Earnings Before Taxes / Sales6: Net Profit Margin➡️What: Percentage of sales that remains as profit after all costs are subtracted.🟰 Formula: Net Income / Sales7: Free Cash Flow Margin➡️What: The percentage of sales translated into free cash flow.🟰 Formula: Free Cash Flow / Sales8: Earnings Per Share (EPS)➡️What: How much money a company makes for each share outstanding.🟰 Formula: Net Income / Shares Outstanding9: Return On Assets (ROA)➡️What: How much profit a company generates from its total assets.🟰 Formula: Net Income / Total Assets10: Return On Equity (ROE)➡️What: Measures how profitable a company is in relation to its equity (the money shareholders have invested in the business).🟰 Formula: Net Income / Equity11: Return On Invested Capital (ROIC)➡️What: Shows you how efficiently a company is allocating capital.🟰 Formula: NOPAT / Total Invested Capital12: Return On Capital Employed (ROCE)➡️What: Measures the profitability of a company and the efficiency with which it uses its capital.🟰 Formula: EBIT / Long-Term Debt + Equity13: Free Cash Flow Conversion➡️What: Measures how much earnings are translated into free cash flow🟰 Formula: Free Cash Flow / Net Income14: Owner's Earnings➡️What: Measures how much cash can be taken out of the business and given to owners🟰 Formula: Net Income + (Depreciation & Amortization) +/- Non Cash Charges - Maintenance Capex +/-Changes in working capital

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14 Profit Ratios …… Business & Investing skills

14 Profit Ratios every investor should know: 💸Accounting is the language of business.Level up your business & investing skills by memorizing these ratios:1: Gross Margin➡️What: The percentage of revenue that is translated into gross profit.🟰 Formula: Gross Profit / Sales2: EBITDA Margin➡️What: The percentage of sales that turns into profit before interest, taxes, depreciation, and amortization are subtracted.🟰 Formula: EBITDA / Sales3: Operating Margin➡️What: The percentage of sales that turn into operating income.🟰 Formula: Operating Income / Sales4: EBIT Margin➡️What: The percentage of sales that turns into profit before interest & taxes are subtracted.🟰 Formula: Earnings Before Interest & Taxes / Sales5: EBT Margin (Pre-Tax Margin)➡️What: Percentage of sales that turn into operating income.🟰 Formula? Earnings Before Taxes / Sales6: Net Profit Margin➡️What: Percentage of sales that remains as profit after all costs are subtracted.🟰 Formula: Net Income / Sales7: Free Cash Flow Margin➡️What: The percentage of sales translated into free cash flow.🟰 Formula: Free Cash Flow / Sales8: Earnings Per Share (EPS)➡️What: How much money a company makes for each share outstanding.🟰 Formula: Net Income / Shares Outstanding9: Return On Assets (ROA)➡️What: How much profit a company generates from its total assets.🟰 Formula: Net Income / Total Assets10: Return On Equity (ROE)➡️What: Measures how profitable a company is in relation to its equity (the money shareholders have invested in the business).🟰 Formula: Net Income / Equity11: Return On Invested Capital (ROIC)➡️What: Shows you how efficiently a company is allocating capital.🟰 Formula: NOPAT / Total Invested Capital12: Return On Capital Employed (ROCE)➡️What: Measures the profitability of a company and the efficiency with which it uses its capital.🟰 Formula: EBIT / Long-Term Debt + Equity13: Free Cash Flow Conversion➡️What: Measures how much earnings are translated into free cash flow🟰 Formula: Free Cash Flow / Net Income14: Owner's Earnings➡️What: Measures how much cash can be taken out of the business and given to owners🟰 Formula: Net Income + (Depreciation & Amortization) +/- Non Cash Charges - Maintenance Capex +/-Changes in working capitalWhat ratios do you track before making an investment? Let me know in the comments section below!-----------Hi 👋 - thanks for reading!Follow Manish Suri for more :) #LinkedIn #Professional #Networking #Career #JobSearch #Business #Leadership #Employment #Opportunity #Workplace #Success #Motivation #PersonalDevelopment #CareerAdvice #JobSeekers #Entrepreneurship #JobOpening #Hiring #Resume #InterviewTips

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14 Profit Ratios every investor should know: 💸Accounting is the language of business.Level up your business & investing skills by memorizing these ratios:1: Gross Margin➡️What: The percentage of revenue that is translated into gross profit.🟰 Formula: Gross Profit / Sales2: EBITDA Margin➡️What: The percentage of sales that turns into profit before interest, taxes, depreciation, and amortization are subtracted.🟰 Formula: EBITDA / Sales3: Operating Margin➡️What: The percentage of sales that turn into operating income.🟰 Formula: Operating Income / Sales4: EBIT Margin➡️What: The percentage of sales that turns into profit before interest & taxes are subtracted.🟰 Formula: Earnings Before Interest & Taxes / Sales5: EBT Margin (Pre-Tax Margin)➡️What: Percentage of sales that turn into operating income.🟰 Formula? Earnings Before Taxes / Sales6: Net Profit Margin➡️What: Percentage of sales that remains as profit after all costs are subtracted.🟰 Formula: Net Income / Sales7: Free Cash Flow Margin➡️What: The percentage of sales translated into free cash flow.🟰 Formula: Free Cash Flow / Sales8: Earnings Per Share (EPS)➡️What: How much money a company makes for each share outstanding.🟰 Formula: Net Income / Shares Outstanding9: Return On Assets (ROA)➡️What: How much profit a company generates from its assets.🟰 Formula: Net Income / Total Assets10: Return On Equity (ROE)➡️What: Measures how profitable a company is in relation to its equity (the money shareholders have invested in the business).🟰 Formula: Net Income / Equity11: Return On Invested Capital (ROIC)➡️What: Shows you how efficiently a company is allocating capital.🟰 Formula: NOPAT / Total Invested Capital12: Return On Capital Employed (ROCE)➡️What: Measures the profitability of a company and the efficiency with which it uses its capital.🟰 Formula: EBIT / Long-Term Debt + Equity13: Free Cash Flow Conversion➡️What: Measures how much earnings are translated into free cash flow🟰 Formula: Free Cash Flow / Net Income14: Owner's Earnings➡️What: Measures how much cash can be taken out of the business and given to owners🟰 Formula: Net Income + (Depreciation & Amortization) +/- Non Cash Charges - Maintenance Capex +/-Changes in working capitalWhat ratios do you track before making an investment? Let me know in the comments section below!-----------P.S. Want to master the basics of accounting (for free)?I created a 5-day, email-based course that explains the Balance Sheet, Income Statement, and Cash Flow Statement in plain English.Get started here (It's free) →https://lnkd.in/eKbRV7g6If you enjoyed this post, please repost ♻️ to share with your audience.

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