Where do I begin when attempting to assess a company's profitability and riskiness?
The question specifically asked what ratios should be used to assess 1. profitability 2. riskiness of a company?
What's your advice and please provide an explanation as to why.© BrainMass Inc. brainmass.com October 2, 2020, 5:56 am ad1c9bdddf
how to assess a company's profitability and riskiness?
Financial ratios are the mostly used forms of measurement that are capable of deducing the organization's profitability and riskiness. This represents a time-tested method wherein the organization can utilize the following ratios to ascertain their profitability including Gross Profit Margin, Operating Profit Margin, Net Profit Margin, and Other Common Size Ratios.
The following formulas are used to deduce the actual gross profit wherein Gross Profit = Net Sales - the Cost of Goods Sold with the Net sales equalling gross sales less any returns and discounts while the Operating Profit equals Gross Margin - Selling and Administrative Expenses with the Administrative Expenses equalling salaries, payroll ...
Ratios for profitability and riskiness is examined for a company.