W hat are the best measures of profitability?
Profitability ratios measure return while the other ratios measure risk. The income statement is the most useful financial analysis tool. Percentage income statements, like the one in Clients & Profits, are especially helpful when compared to other fiscal periods or information from other agencies. Both gross profit margin and net profit margin are reported on the income statement. Percent Income Statements Income statements quickly get you to “the bottom line”. Gross profit margin is the percentage of income left after deducting job costs. Net profit margin is the percentage of income after all expenses have been deducted. Profit margins are calculated on income statements using the calculation, profit/income. Cost and expense account balances are also expressed as a percentage of income. You can choose to print percentages based on expense/income (standard) or expense/gross profit (AGI) Compare month-to-date percentages on the income statement to year-to-date percentages on the same
