Profitability & Efficiency Ratios
How well a company turns sales and capital into profit — the quality scorecard.
Lessons
- Gross, Operating & Net MarginsThree margins that show where profit is made and where it leaks away.
- Return on Equity (ROE)How much profit the company earns on the money owners have put in. The investor’s favourite.
- ROCE & ROICReturns on all the capital at work — often a truer quality signal than ROE alone.
- DuPont: Breaking ROE ApartSplit ROE into margin, turnover and leverage to see what is really driving returns.
- Asset Turnover & EfficiencyHow hard a company’s assets work to produce sales — capital-light vs capital-heavy.