Profitability ratios operating profit margin ratio

Operating profit margin ratio Operating profit (EBIT)/ Sales revenue = 9,705/ 66,415 = 14.6%... 

Since an inherent goal of any business is to be profitable, we can view profitability ratios as measures of overall success in the daily operations of a business. More specifically, profitability ratios provide a method to measure the overall financial success of a company. Examining profitability ratios allows managers to assess the company s level of success in generating profits. The most commonly used profitability ratios are the gross profit margin and the net profit margin. 

Net profit margin indicates the fraction of net profit that is generated for every dollar of sales. As mentioned earlier, as a profitability ratio, it could be used to determine how well the organization manages its operating expenses. It could also be used to compare the performance of two or more pharmacies within a chain or to assess the performance of a pharmacy against industry averages. 

Basic earnings power (BEP) ratio is used for two reasons. One, it is used to measure the earnings power of a company s assets. In other words, it answers the question, how many dollars has the company earned from operations per dollar of asset employed Second, since taxes and debt financing have a direct effect on profit margin on sales, BEP is useful in distinguishing between companies with different tax and debt structures. PepsiCo brings in 12.5 cents in operating profit for every dollar it has in total assets. 

As discussed earlier, the sourcing department has an incredible opportunity to improve corporate financial and operational performance. They have the ability to lower COGS, increase profit margins, reduce inventory, and improve inventory and asset performance ratios. The DuPont model is once again used to demonstrate these effects. Using the income statement and balance sheet, the DuPont model is created for a company s current position or base case (Figure 10.6). 

Figure 4.35 represents a highly simplified view of a FCC unit We can consider the FCC unit as a black-box that converts different types of feed into products with varying profit margins. The LP model expects that the profits or values of the products are readily available. If we consider that only straight-run VGO enters the unit at fixed operating conditions (riser temperature, catalyst-to-oil ratio, etc.), we can represent the yield of the unit as ... 

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