# What is account profitability?

**account profitability**reflects the desire to allocate as much of the indirect costs associated with the 'delivery' of the product or service. Till recently, the emphasis has been on gross margin (or operating margin) as a measure of effective marketing.

Thereof, how do you determine profitability?

**Profitability Ratios Formula**

- Gross Profit Margin = (Gross Profit / Sales) * 100.
- Operating Profit Margin = (Operating Profit / Sales) * 100.
- Net Profit Margin = (Net Income / Sales)* 100.
- Return on Assets = (Net income / Assets)* 100.
- Return on Equity = Net Income / Shareholder's Equity.

Beside above, what is product profitability? The **product profitability** consists of your revenue from the **product** and the amount it costs to make a sales. Knowing the **profitability** of a **product** also allows you to compare different products. This involves direct costs, such as material used to manufacture the costs.

Keeping this in consideration, what are the three main profitability ratios?

Types of **Profitability Ratios** Common **profitability ratios** used in analyzing a company's performance include gross profit margin (GPM), operating margin (OM), return on assets (ROA) , return on equity (ROE), return on sales (ROS) and return on investment (ROI).

What do Profitability ratios tell us?

**Profitability ratios** are financial metrics used by analysts and investors to measure and evaluate the ability of a company to generate income (profit) relative to revenue, balance sheet assets. They **show** how well a company utilizes its assets to produce profit and value to shareholders.