Ratios: Profit Margin definitions Flashcards
Ratios: Profit Margin definitions
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Profit Margin Percentage showing how much net income is earned for each dollar of sales, reflecting overall profitability. Profitability Ratio Financial metric used to assess a company's ability to generate earnings relative to sales or assets. Net Income Amount remaining after all expenses, including cost of goods sold and operating costs, are subtracted from total revenue. Net Sales Total revenue from sales after deducting returns, allowances, and discounts. Benchmarking Process of comparing a company's financial metrics to competitors or industry averages to evaluate performance. Industry Average Standardized value representing the typical performance metric within a specific business sector. Competitor Comparison Assessment of a company's financial ratios against those of similar businesses in the same market. Net Loss Situation where total expenses exceed total revenues, resulting in a negative bottom line. Cost of Goods Sold Direct costs attributable to the production of goods sold by a company, such as materials and labor. Depreciation Allocation of the cost of tangible assets over their useful lives, reducing reported income. Sales Revenue Total income generated from goods or services sold before any expenses are deducted. Percentage Calculation Mathematical process of expressing a ratio as a fraction of 100, often used for financial ratios. Financial Health Overall condition of a company’s finances, often indicated by profitability and liquidity ratios. Strategic Positioning Company’s placement in the market relative to competitors, influenced by financial performance metrics. Expense Outflow of money or resources to pay for goods or services, reducing net income.
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