The profitability margin ratios are used to measure profitability relative to the revenue. The ratios help users of the financial statements assess how much profits are generated from use of the resources and the value that is added to the shareholders. There are four profitability margin ratios which can be determined from the financial statements of corporates: the gross profit margin, the EBITDA margin, the EBIT margin and the Net profit margin.
Key learning objectives:
What are the benefits of profitability margin ratios?
How are the different profitability margin ratios calculated?