Profitability ratios reflect the net result of all the firm's 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 are accounted for. It is a measure of the firm's operating efficiency. Its equation is: Operating margin =SalesEBIT Its equation is: Basic eaming power (BEP)=TotalassetsEBTT The return on invested capital (ROIC) shows the after-tax operating return on total invested capital, which is equal to the sum of debt and equity (assuming no preferred stock is issued). Its equation is: Return on invested capital (ROIC) =TotalinvestedcapitalEBIT(1T) The return on common equity (ROE) measures the return on investment. Its equation is: Return on common equity ( ROE )=CommonequityNetincome Profitability ratios reflect the net result of all the firm's 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 are accounted for. It is a measure of the firm's operating efficiency. Its equation is: Operating margin =SalesEBIT Its equation is: Basic eaming power (BEP)=TotalassetsEBTT The return on invested capital (ROIC) shows the after-tax operating return on total invested capital, which is equal to the sum of debt and equity (assuming no preferred stock is issued). Its equation is: Return on invested capital (ROIC) =TotalinvestedcapitalEBIT(1T) The return on common equity (ROE) measures the return on investment. Its equation is: Return on common equity ( ROE )=CommonequityNetincome