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Sana Securities
Profitability Ratio
Operating Profit Margin & Net Profit Margin

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FINANCIAL STATEMENTS

 Profit & Loss account (Income statement) : shows how much the
company earned and spent during the year

 Balance Sheet : shows the breakdown of the assets and liabilities of

the company at a fixed date (like close of financial year)

A company's assets have to equal, or "balance," the sum of its liabilities

and shareholders' equity.

Assets = Liabilities + Shareholders' Equity

 Cash flow statement : Shows how cash moved in and out of the
company during a given period. As accounting is on accrual basis and
not cash basis, the cash flow statement helps in understanding “how
much CASH is actually being generated”
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Profit & Loss Account ratios – Profitability Ratios

Sales EBITDA or Operating profit / loss (operational journey)

EBITDA Net Profit (final journey) (i.e. PAT)
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Formulas:

Expresses in percentage terms the portion of sales revenue

which remains after incurring all operational expenses.

Expresses in percentage terms the portion of sales revenue

which is left for the shareholders.
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Operating Profit Margin

It is the proportion of revenues remaining after paying for the costs of

operating a business such as, labour costs (salaries & wages), raw materials,
selling and administrative expenses etc.

Net Profit Margin

Indicates what is left for the owners (i.e. shareholder) as a percentage of total
income or sales after accounting for all other costs such as depreciation,
finance charges, taxes and exceptional items.

 When calculating the Net Profit Margin on a consolidated basis,

the numerator is profit after tax but before minority interest and
share of associates. This is because total income from operations in the
denominator represents the income generated by 'all the
constituents' of the company including minorities.
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PAY FOR RESEARCH, NOT COMMISSION

Sana Securities
WGF 1 & 2 Hans Bhavan,
Indraprastha Estate
New Delhi 110002 India
Tel: + 91 11 41517078 | +91 11 41517061
Email : info@sanaresearch.com

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