Azerbaijan state economics university

Profitability Ratios

Profitability ratios refer to financial ratios utilized to evaluate the company’s effectiveness in making use of the invested assets to generate earnings in over the financial periods[ CITATION Tho09 \l 1033 ]. The higher values of the company’s reported profitability ratio indicates that the business is advancing and worth of investment. The BP Company profitability ratios are discussed under profit margin, return on equity as well as return on assets.

Profit margin ratio

Profit margin ratio is a profitability ratio describing the company’s effectiveness in making use of its investments to generate earnings which is relative to the sales[ CITATION Nex07 \l 1033 ]. Profit margin ratio unveils the company’s financial ability to gather for its operating expenses as well as generating surplus earning from sales of goods and services. The higher the company’s profit margin indicates viability of the company in converting its sales into actual earnings.
Net profit margin =

	Profit Margin Ratio
	Years in US$ Millions
Year	2013	2012	2011	2010
EBIT	31,769	19,769	39,815	-3,702
Sales	379,136	375765	375,517	297,107
Profit Margin Ratio	8%	5%	11%	-1%

BP’s company profit margin ratio indicates a growing trend in the company ability to generate earnings attributable to the shareholders through sales. The company’s reveals increasing trend from -1% in financial year 2010 while increase to 11% in the subsequent year 2011. Subsequently, BP’s company profitability margin decrease towards 2012 to 5% while an increases in 2013 to 8%. This shows that the company management has enhance quality control initiatives to enhance profitability.