Profitability indicators: table with all formulas

Financial indicators are quantitative tools that allow us to measure and evaluate various aspects of the economic and financial performance of an entity, whether a company, a financial institution or even a country. These indicators provide key information on financial health, operational efficiency and profitability, among other relevant aspects. By using specific financial data in a company, such as income, expenses, assets and liabilities, financial indicators allow analysts and decision makers to evaluate the performance and financial capacity of an entity, thus facilitating informed business and economic decision-making. Automate your company's accounting in minutes with Mobilvendor. Know everything hereAccounting system accounting automationContents hide 1 Table of financial indicators2 What are the most used Financial Indicators in companies? 2.1 Profit Margin2.2 Liquidity Ratio2.3 Return on Assets (ROA) and Return on Equity (ROE) 2.4 Debt Ratio 2.5 Inventory Turnover and Average Collection Period2.6 Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) 2.7 Gross Margin and Net Margin3 Why is it important to use Financial Indicators? Table of financial indicatorsHere is a complete list of the most commonly used financial indicators in companies and businesses: Financial Indicator Formula Current Liquidity Current Assets/Current LiabilitiesAcid Test Current Assets — Inventories/Current LiabilitiesTotal Liabilities Indebtedness/Total Assets Total Equity Debt/Equity/Fixed Asset Debt/Net Fixed AssetsTotal Asset Leverage/Equity/Financial Leverage (UAI/Equity)/(UAII/Total Assets) Portfolio Turnover Sales/Accounts Receivable Fixed Asset Rotation Sales/Fixed AssetsSales Rotation Sales/Total AssetsAverage Collection Period (Accounts Receivable * 365)/Sales/Average Payment Period (Accounts and Documents Payable * 365)/Purchase/Impact Expenses Administration and Sales Expenses/Sales and Administrative Expenses/Sales Impact Financial Burden Financial Expenses/Sales/Net Profitability of Assets (DuPont) (Net Profit/Sales) * (Sales/Total Assets) Gross Margin Net Sales — Cost of Sales/Margin Operating Profit Operational/SalesNet Sales Profitability (Net Margin) Net Profit/SalesOperating Return on Equity (Operating Profit/Equity) Financial Profitability (Sales/Assets) * (UAII/Sales) * (Assets/Equity) * (UAI/UAII) * (UN/UAI) Table of Financial Indicators — Recommended by the Superintendency of Companies of Ecuador What are the most used Financial Indicators in companies? Profit marginThis indicator measures a company's efficiency in converting its sales into profits. It is expressed as a percentage and is calculated by dividing net income by sales. Liquidity Ratio Liquidity indices, such as the current liquidity ratio and the fast index, evaluate a company's ability to cover its short-term obligations. They help determine if the company has enough liquid assets to meet its debts. Return on Assets (ROA) and Return on Equity (ROE) These indicators measure the efficiency with which a company uses its assets and the return generated for shareholders. They are calculated by dividing net income by total assets (ROA) or net worth (ROE). Debt ratioThe debt ratio evaluates the ratio of debt to equity of the company. An adequate level of indebtedness can be healthy, but an excess can increase financial risk.Inventory Turnover and Average Collection PeriodThese indicators measure efficiency in managing inventories and accounts receivable. Efficient turnover and a shorter collection period are often indicative of good resource management. Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) EBITDA is a measure of a company's operating performance, excluding the effects of funding and accounting decisions. It is used to evaluate cash generation capacity. Gross Margin and Net MarginThese indicators provide an overview of profit margins. Gross margin is calculated by dividing gross profit by sales, while net profit is obtained by dividing net profit by sales. These are just a few examples, and the choice of indicators may vary depending on the industry and the company's specific objectives. The right combination and analysis of these indicators provide a comprehensive view of a company's financial health and performance. Why is it important to use Financial Indicators? The use of financial indicators is crucial for several fundamental reasons. First, they provide an objective and quantitative evaluation of economic performance, allowing companies, investors and analysts to understand the financial situation of an entity more precisely. These indicators provide insights into profitability, operational efficiency, liquidity and other key aspects, making it easier to make informed financial decisions.