Profitability analysis

Introduction to Financial Statements in Power BI

Nikisha Alcindor

Data Scientist and Investor

Profitability ratios

  • Measures income success over time
  • Ratios Include:
    • Profit Margin
    • Asset Turnover
    • Return on Assets
  • Indicate a company's income-earning capacity and affect
    • Company's growth
    • Ability to take out loans
    • Attract investors

Image of a man drawing an upward trending line representing profit

1 Weygandt, Jerry J., et al. Accounting Principles, John Wiley & Sons, 2015.
Introduction to Financial Statements in Power BI

Profit margin

  • Percentage of each dollar of sales that results in net income.

Profit Margin Equation

Profit margin Example

Profit Margin Income Statement

1 Weygandt, Jerry J., et al. Accounting Principles, John Wiley & Sons, 2015.
Introduction to Financial Statements in Power BI

Asset turnover

  • Efficiency in assets used to generate sales.
  • Example - Cookie business:
    • Several ovens cook hundreds of cookies

 

Asset Turnover Equation

Asset Turnover Example

Balance sheet and Income Statement

1 Weygandt, Jerry J., et al. Accounting Principles, John Wiley & Sons, 2015.
Introduction to Financial Statements in Power BI

Return on assets (ROA)

  • Measures overall profitability in relation to Total Assets

ROA Equation

ROA Example

ROA Balance Sheet and Income Statement

1 Weygandt, Jerry J., et al. Accounting Principles, John Wiley & Sons, 2015.
Introduction to Financial Statements in Power BI

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Introduction to Financial Statements in Power BI

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