Introduction to Mortgage Servicing Examinations Training

Financial Ratios

Earnings/ Profitability

Revenue - Expenses

Profit Margin

=

Revenue

Percentage of each dollar business retains

Revenue - Cost of Goods

Gross Margin Ratio

=

Revenue

Compares gross margin to net sales

Gain from investment - Cost of Investment

Return on Investment

=

Cost of Investment

Compares profits to cost of investments

Net Income

Return on Assets

=

Total Assets

Measures profitability in relation to assets

Net Income

Return on Equity

=

Shareholder's Equity

Measures management's success in maximizing return on owner's investment

Total Liabilities

Debt to Equity Ratio

=

Shareholder's Equity

Indicator of ROE volatility