Profitability Ratio

A measure of the proportion of revenue that is left after deducting all expenses. This excludes finance costs and tax expenses. The business makes ($8.04) of EBIT for every $100 it generates of revenue. The profitability ratio can be further improved by improving price, volume, cost and expense management. For this period, the Profitability ratio is below the required target of 15%.

The Profitability Ratio is less than the alert level of 5%. An immediate review of strategies to help improve the top and bottom line is required. Strategies to improve profitability may include: increasing price, increasing sales volume, reducing the cost of sales, and reducing operating expenses.