Profitability ratios reflect the net result of all the firm's

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policies and operating decisions. The profitability ratios include the: $(1)$ Operating margin, $(2)$ Profit margin, $(3)$ Return on total assets $($ROA$),(4)$ Basic earning power $($BEP$),(5)$ Return on invested capital $($ROIC$),$ and $(6)$ Return on common equity $($ROE$).$

The operating margin indicates what percentage of sales remain after

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are accounted for. It is a measure of the firm's operating efficiency. Its equation is: