These measures evaluate a company's level of profitability by expressing sales and profits as a percentage of various other items.

**Return on assets (ROA)**. ROA provides a quantitative description of how well a company has invested in its assets.

To calculate ROA, divide net income by assets.**Return on equity (ROE)**. ROE shows the return on the portion of the company's financing that is provided by owners.

To calculate ROE, divide net income by owner's equity.**Return on Sales (ROS)**. Also known as profit margin, ROS is a way to measure how sales translate into profit. For example, if a company earns $10 for every $100 in sales, the ROS is 10/100 or 10%.

To calculate ROS, divide net income by the total sales volume.**Gross margin**. A ratio that measures the percentage of gross profit relative to sales revenue. Gross profit is profit or income after deducting the cost of goods sold. A decline in gross margin may signal that a company won't be able to meet its expense obligations.*To calculate gross margin, first calculate gross profit by subtracting cost of goods sold from sales. Then calculate gross margin by dividing gross profit by sales.***Earnings Before Interest and Taxes (EBIT) margin**. Many analysts use this indicator, also known as**operating margin**, to see how profitable a company's operating activities are.

To calculate the EBIT margin, divide net sales by EBIT.

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