Method of calculation
Basic earnings power ratio
Ratio's description
The ratio complements the assessment of assets profitability, calculated at the level of profit on operating activities.
Ratio's interpretation
 The greater the ratio's value, the greater the assets profitability of the company.
 The ratio can be applied to make management decisions: ratio's value indicates the maximum allowed value of liabilities' interest rate, which allows for positive financial leverage effect. Liabilities with higher interest rate lead to negative financial leverage effect ("financial club").
 When assessing the changes in ratio's value over time (over few periods):
 the increase of ratio's value is assessed positively if it results from the increased profit on operating activities,
 the decrease of ratio's value is assessed negatively, since it indicates worsened operating profitability of the company's capital.

Przy ocenie zmian wartości wskaźnika w czasie (w ciągu kilku okresów)