Profitability Ratios
Definition
Ratios such as gross margin, operating margin, net margin, ROE and ROA that measure how effectively a business turns revenue and resources into profit. They are the core of performance analysis.
Related Terms in Financial Analysis
Efficiency Ratios
Ratios such as inventory turnover, asset turnover and receivables turnover that measure how well a business uses its assets and manages its working capital to generate sales.
DuPont Analysis
A framework that breaks return on equity into profit margin, asset turnover and financial leverage, revealing which of the three is really driving — or dragging — a company's return on equity.
Budget Variance
The difference between a budgeted figure and the actual result. Favourable variances improve profit versus plan; adverse variances reduce it. Analysing them keeps spending and performance on track.
Rolling Forecast
A forecast that is continually updated by adding a new period as each one ends, always looking the same distance ahead. It keeps planning current instead of fixed to a single annual budget.
Stop memorising terms — let HelloBooks do the work
AI-assisted bookkeeping that handles invoicing, GST, reconciliations, and reports automatically. Free to start.