Common Ratios for Financial Analysis - I

Return on Assets = Net Income / Total Assets
This ratio usually tells about the utilization of the assets committed to the business.

Return on Equity = Net Income / Shareholder's Equity
This ratio tells about how well the shareholders investment is used in the business.

Return on Investment
This is a very vague term since "investment" is not defined clearly. Investment may be in the form of assets or owners equity or shareholders equity.

EBIT = (Earning before Interest and Taxes) is also known as the operating margin
Operating Margin = EBIT / Net Sales

An operating margin of 0.12 means company is making 0.12 $ on every 1 $ of sales.
EBIT comes after the company has taken into the consideration the wages, the cost of production, cost of raw materials and other things.

Fully Diluted EPS = (Net Income - Preferred stock dividends)/ ( common stock + equivalent)

Profit Margin = Net Income / Net Sales. This is also known as the retun on sales