Basic Earning Power Ratio Calculator

The basic earning power ratio is the relationship between the earning power of a company and its assets. The higher the Earning Power Ratio, the better it is.

The formula for calculating the basic earning power ratio is:

Basic Earning Power Ratio = EBIT / Total Assets


Basic Earning Power Ratio = Operating Profit Margin * Total Assets Turnover Ratio.

We need to understand that the second formula will eventually give the same result as the first one. How? Let us have a look.

Operating Profit Margin = EBIT / Turnover

Total Assets Turnover Ratio = Turnover / Total Assets

Now putting both these formulas in the second formula of the basic earning power ratio, we will get the first formula.

Basic Earning Power Ratio = (EBIT / Turnover) * (Turnover / Total Assets)

That is, EBIT / Total Assets

Basic Earning Power Ratio Calculator

How to Calculate using Calculator?

The user has to only type the following figures in the calculator and will get the result with a simple click on the calculate button.

EBIT – It is the earnings of the company before paying off interest and taxes. Both operating and non-operating incomes are a part of this. EBIT can be calculated with the help of the following formula:

EBIT = Net Income + Interest + Taxes

To know more about EBIT, refer to the article: EBIT

Total Assets – We can easily obtain the value of total assets from the balance sheet.

Sanjay Borad

Sanjay Bulaki Borad

MBA-Finance, CMA, CS, Insolvency Professional, B'Com

Sanjay Borad, Founder of eFinanceManagement, is a Management Consultant with 7 years of MNC experience and 11 years in Consultancy. He caters to clients with turnovers from 200 Million to 12,000 Million, including listed entities, and has vast industry experience in over 20 sectors. Additionally, he serves as a visiting faculty for Finance and Costing in MBA Colleges and CA, CMA Coaching Classes.

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