How to analyze the profitability of enterprises

Analysis of the profitability of the enterprise can not only look at the income statement, should be analyzed from three aspects:

1, the profitability of assets. That is, the ability of the enterprise to use assets to make money.

Asset profitability is a measure of the ability to use existing assets to obtain profits, the main indicators of total return on assets and cost margin

2, the profitability of capital. The ability of the enterprise to use shareholders' capital to make money.

Return on net assets is the percentage of net profit and net assets, also equal to the product of the net interest rate on total assets and the equity multiplier, which is the starting point for DuPont analysis. This indicator reflects the level of return on shareholders' equity and is used to measure the efficiency with which the company utilizes its own capital. The higher the value of the indicator, the more efficient the company's utilization of the capital invested by shareholders.

3, the profitability of commodity operations. That is, the ability to sell products to make money.

Commodity profitability is mainly a measure of the ability to sell goods to obtain profits, the main indicators are net interest rate and gross margin.

Gross margin = (operating income - operating costs) / operating income.

Gross margin is actually the main factor affecting net margin, which is net margin = net profit / operating income.