The profit margin indicates what percentage of sales

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represents. It measures the firm's combined impact of operating efficiency and

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on the firm's profitability. Its equation is:

The return on total assets $($ROA$)$ measures the return on all the firm's assets

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interest and taxes. Its equation is:

A low ROA can result from a firm's decision to use more debt because high interest expenses will cause net income to

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$.$ The basic earning power $($BEP$)$ ratio shows the earning power of the firm's assets

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taxes and debt and is useful for comparing firms with different debt ratios and tax rates. Its equation is:

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:

The return on common equity $($ROE$)$ measures the return on

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investment. Its equation is: