📊 Profitability Ratios Calculator
Enter income-statement and balance-sheet figures to get the margins, ROA and ROE — each explained, with guidance to benchmark against industry peers.
40% of every sales dollar is left after the direct cost of goods — the money available to cover operating expenses and profit. Whether that's "good" depends heavily on the industry (software runs high, groceries run low), so compare to peers.
15% of revenue remains as operating profit after running costs. Higher is better, but it's industry-relative — benchmark against competitors.
10% of each sales dollar becomes bottom-line profit after all expenses, interest and tax. Compare to industry peers — a "good" net margin varies widely by sector.
The company generates 5% of profit per dollar of assets — how efficiently management turns assets into earnings. Asset-heavy industries run lower; compare to peers.
Shareholders earn 12.5% on their equity. Often 15–20% is considered strong — but a high ROE can be driven by heavy debt, so read it alongside the leverage ratios.
Profitability ratios show how much profit a company squeezes from its sales, assets and equity. There is no universal “good” number — software margins dwarf grocery margins, and asset-light firms post far higher returns than utilities — so the tool flags these to compare against industry peers and the company’s own trend rather than an absolute cutoff. Educational information, not financial advice. 🔒 In your browser.
How the profitability ratios calculator works
Profitability ratios show how much profit a company extracts from its sales, assets and equity. From revenue, cost of goods sold, operating income, net income, assets and equity the tool computes gross margin, operating margin, net profit margin, return on assets (net income ÷ assets) and return on equity (net income ÷ equity) — and explains what each says about the business.
These ratios are highly industry-dependent — software margins dwarf grocery margins, and asset-light firms post far higher returns than utilities — so there is no universal "good" number. The tool interprets them directionally and flags that you should compare to industry peers and the company's own trend. A high ROE can also be driven by heavy debt, so read it with the leverage ratios. Educational, not investment advice.
Frequently asked questions
What is a good net profit margin?
It depends entirely on the industry — retail often nets 2–6%, software 20–30%+. There's no universal threshold, so a positive, stable or rising margin compared to peers matters more than the absolute number.
What is the difference between gross, operating and net margin?
Gross margin is after the direct cost of goods; operating margin is after running costs too (but before interest and tax); net margin is after everything. Each strips away more costs, showing profitability at a different level of the income statement.
What is a good ROE?
Around 15–20% is often cited as strong for broad markets, but it's best judged against industry peers. Watch out: a high ROE can come from high leverage rather than efficiency, so always read it alongside the debt ratios.
What is the difference between ROA and ROE?
ROA (net income ÷ assets) measures how efficiently a company uses all its assets; ROE (net income ÷ equity) measures the return to shareholders specifically. ROE is boosted by debt, ROA isn't — the gap between them reflects leverage.
Why does the tool say "compare to peers" instead of good/bad?
Because profitability benchmarks vary so much by sector that a single healthy/concern cutoff would mislead — a 4% ROA is fine for a utility but weak for software. So the tool interprets the meaning and points you to peer and trend comparison. Educational information, not advice.
Educational information, not financial advice. These calculators use standard formulas with the figures you enter; results are illustrations, not guarantees. For decisions about your money, consult a qualified, regulated financial professional.