Financial data alone may not provide a complete picture of a company's financial performance and well-being. It is difficult to evaluate numbers in their own right without comparing them to certain norms and standards. The reports provide a set of standardized metrics that can be compared between companies. A company's ratios can be evaluated against industry benchmarks to know the relative position of that company compared to its peers. There are various types of reports depending on the nature of the analysis required. Some ratios measure a company's operational strengths while others measure financial strength, valuation, etc. of the company. Profitability Ratios Gross Profit to Sales This ratio presents gross profit as a percentage of the company's total operating revenue. Gross profit is obtained by deducting the cost of sales from revenues in the case of manufacturing and trading companies. In the case of a service company, the costs incurred for providing services are deducted from revenues. The ratio provides the gross margin enjoyed by the products sold by the company and is an indicator of the pricing power enjoyed by the company. However, in the case of multi-product or diversified companies, this ratio may not provide a clear picture. Operating profit versus sales. The report presents operating profits as a percentage of operating revenue. Operating profits are profits before interest and taxes. Therefore, the operating margin gives an idea of ​​the profits generated before interest and taxes. In addition to being a measure of the pricing power enjoyed by the company, the operating margin also gives a general idea of ​​the company's efficiency. Net profit to salesThe net profit margin is calculated by dividing the net profit at net of taxes for operating revenues. The ratio is a measure of profits per sales rupee that accrue to shareholders after paying off all external receivables. Return on Assets Also called return on investment, this ratio measures net income before interest as a percentage of total assets. Interest expenses are added to your net income when calculating this ratio. The ratio is an indicator of the efficiency of asset utilization. If the return on assets is lower than the average cost of funds, then the company is not doing a good enough job of squeezing returns from its assets. Return on Equity Also called return on shareholder funds or return on equity, this ratio measures the returns generated by the company on funds provided by shareholders.