Profitability Ratios

Operating profitability ratio: operating income in the numerator, revenues in the denominator. Operating margin. Operating Profits.

That's one measure of profitability. Pre-tax, old school.

Okay, then you have net margin, or net income margin. Just earnings or net income in the numerator, revenues in the denominator. Say it with us: "net margin.".

Okay, then you have EBITDA, or "cash flow margin." EBITDA in the numerator, revenues in the denominator.

All kinds of ways to slice and dice profits and profitability ratios. Just be thankful you have them. In the real world, they're elusive. But these are the big 4 profitability ratios that investors care about. And they should care; the more profitable a company, well, the better. More or less.