[Verse 1] When investors want to know how well a company's doing They look beyond the revenue, there's profit they're pursuing Four key ratios tell the story of efficiency and might ROE and ROA, gross and net margin paint the financial sight [Chorus] Return on Equity, ROE shows the power Net income over equity, shareholders' finest hour Return on Assets, ROA reveals the truth How well assets generate profit, that's the proof Gross margin shows the markup after costs of goods are through Net margin tells the bottom line, what's left for me and you [Verse 2] ROE takes net income divided by shareholders' equity It measures how effectively the owners' money's working free Higher ROE means management is using owner funds with skill But leverage can inflate it, so dig deeper if you will [Chorus] Return on Equity, ROE shows the power Net income over equity, shareholders' finest hour Return on Assets, ROA reveals the truth How well assets generate profit, that's the proof Gross margin shows the markup after costs of goods are through Net margin tells the bottom line, what's left for me and you [Verse 3] ROA divides net income by total assets on the sheet It shows how well the company makes every dollar compete Without the leverage factor that can make ROE deceive ROA shows pure efficiency, what assets can achieve [Bridge] Gross margin takes the revenue minus cost of goods sold Divide by revenue and you've got the story told Net margin goes much deeper, takes all expenses out Net income over revenue shows what it's all about [Verse 4] Compare these ratios to industry peers and past performance too Trends matter more than single points when analyzing what they do High gross with low net margin means expenses are too high But strong ROE and ROA means the company can fly [Chorus] Return on Equity, ROE shows the power Net income over equity, shareholders' finest hour Return on Assets, ROA reveals the truth How well assets generate profit, that's the proof Gross margin shows the markup after costs of goods are through Net margin tells the bottom line, what's left for me and you [Outro] Four ratios working together tell the profitability tale ROE, ROA, gross and net, they never fail To show you how a company turns revenue to gold These metrics are the story every analyst should know
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