| Sl | Terms | Details | Example |
| 1 | Revenue | The total amount of sales made by a company during a given quarter/year. | No. of Cars sold = 100
Price of each Car = Rs.1,00,000
Revenue = Rs.1,00,00,000 |
| 2 | Expenses | How much the company spent for producing the goods (manufacturing, transport, human resources, rent) that were sold in that quarter/year. | No. of Cars sold = 100
Price of producing 100 Cars i.e.
Expenses = Rs.40,00,000 |
| 3 | Operating profit | The amount you get after deducting the expenses (used only for the company’s operations) from the revenue in that quarter/year. | No. of Cars sold = 100
Revenue = Rs.1,00,00,000
Expenses = Rs.40,00,000
Operating profit = Rs.60,00,000 |
| 4 | Profit margin | Compare this margin with its previous quarter/year to understand how well the company has been using its resources to generate profits | No. of Cars sold = 100
Revenue = Rs.1,00,00,000
Expenses = Rs.40,00,000
Operating profit = Rs.60,00,000
Operating profit margin
= (Operating profit/Revenue) x 100
= 60% |
| 5 | Interest | If a company has taken debt, assess the interest section. Compare with the previous quarter/year to check if it has increased or decreased. Higher the interest, higher the debt— impacting its profits. | Loan taken by the company = Rs.50,00,000
Rate of interest = 10%
Interest = Rs.5,00,000
Operating profit becomes = Rs.55,00,000 |
| 6 | Depreciation | This is the non-cash expense that means reduction in the value of a company asset over time. The company buys a Cars manufacturing machine | Price of the machine = 20,00,000
Lifespan = 10 years
Depreciation per year = 10%
Depreciation per year = Rs.2,00,000
Operating profit becomes = Rs.53,00,000 |
| 7 | Tax | This is the amount of income tax payable
by the company on its earnings. | Operating profit = Rs.53,00,000
Tax rate = 30%
Tax liability = 30% x Rs.53,00,000
= Rs.15,90,000
Net profit = Operating profit – Tax liability
= Rs.37,10,000 |
Asalaamaikum Abuowais bhai,
Many thanks for the detail’s explanation
Interested to read similar blog that describe all shariah finance ratio by considering few sectors annual reports.
Also if we read annual report we find financial data on multiple pages of Annual report , interested to know how we validate and consider the data from all those respective financial data..
Jazakalla khair,
Samir
jazkallah o khair for appreciation. insha allah fianicial we will share ratio also.
Isme buy aur sell ka option nahi hai
Hi
Assalamualaikum. This is such a lovely explanation in simple steps. Keep helping. Jazakallah
The terms column of Serial Number 3 (Row 3) talks about Operating Profit and it is ₹60,00,000 Lakhs, 60% age of the Revenue.
The example column of Serial Number 5 (Row 5), discusses the ‘operating profit’ again. Is this a different example from the one in Row 3. If different the further discuss become based on this example, if it is a part of the orginal example in Row 1, then I want to know is this the ‘operating profit from Interest’, and the one in Serial 5, plainly operating cost.
Are these two type of operating cost?
Bhaut bhatrin