Profitability Analysis

Difficulty level: Basic

Profitability ratios measure the company's ability to generate profitable sales from its resources (assets).


Ratios (Summary)

Verizon Communications Inc., profitability ratios

 
Dec 31, 2014 Dec 31, 2013 Dec 31, 2012 Dec 31, 2011 Dec 31, 2010
Return on Sales
Gross profit margin 60.71% 62.76% 60.05% 58.62% 58.57%
Operating profit margin 15.42% 26.52% 11.36% 11.62% 13.74%
Net profit margin 7.57% 9.54% 0.76% 2.17% 2.39%
Return on Investment
Return on equity (ROE) 78.26% 29.60% 2.64% 6.68% 6.61%
Return on assets (ROA) 4.14% 4.19% 0.39% 1.04% 1.16%

Source: Based on data from Verizon Communications Inc. Annual Reports

Ratio Description The company
Gross profit margin Gross profit margin indicates the percentage of revenue available to cover operating and other expenditures. Verizon Communications Inc.'s gross profit margin improved from 2012 to 2013 but then slightly deteriorated from 2013 to 2014 not reaching 2012 level.
Operating profit margin A profitability ratio calculated as operating income divided by revenue. Verizon Communications Inc.'s operating profit margin improved from 2012 to 2013 but then slightly deteriorated from 2013 to 2014 not reaching 2012 level.
Net profit margin An indicator of profitability, calculated as net income divided by revenue. Verizon Communications Inc.'s net profit margin improved from 2012 to 2013 but then slightly deteriorated from 2013 to 2014.
ROE A profitability ratio calculated as net income divided by shareholders' equity. Verizon Communications Inc.'s ROE improved from 2012 to 2013 and from 2013 to 2014.
ROA A profitability ratio calculated as net income divided by total assets. Verizon Communications Inc.'s ROA improved from 2012 to 2013 but then slightly deteriorated from 2013 to 2014.

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Gross Profit Margin

Verizon Communications Inc., gross profit margin calculation

 
Dec 31, 2014 Dec 31, 2013 Dec 31, 2012 Dec 31, 2011 Dec 31, 2010
Selected Financial Data (USD $ in millions)
Gross profit 77,148  75,663  69,571  65,000  62,416 
Operating revenues 127,079  120,550  115,846  110,875  106,565 
Ratio
Gross profit margin1 60.71% 62.76% 60.05% 58.62% 58.57%
Benchmarks
Gross Profit Margin, Competitors
AT&T Inc. 54.24% 60.03% 56.67% 54.72% 57.85%

Source: Based on data from Verizon Communications Inc. Annual Reports

2014 Calculations

1 Gross profit margin = 100 × Gross profit ÷ Operating revenues
= 100 × 77,148 ÷ 127,079 = 60.71%

Ratio Description The company
Gross profit margin Gross profit margin indicates the percentage of revenue available to cover operating and other expenditures. Verizon Communications Inc.'s gross profit margin improved from 2012 to 2013 but then slightly deteriorated from 2013 to 2014 not reaching 2012 level.

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Operating Profit Margin

Verizon Communications Inc., operating profit margin calculation, comparison to benchmarks

 
Dec 31, 2014 Dec 31, 2013 Dec 31, 2012 Dec 31, 2011 Dec 31, 2010
Selected Financial Data (USD $ in millions)
Operating income 19,599  31,968  13,160  12,880  14,645 
Operating revenues 127,079  120,550  115,846  110,875  106,565 
Ratio
Operating profit margin1 15.42% 26.52% 11.36% 11.62% 13.74%
Benchmarks
Operating Profit Margin, Competitors
AT&T Inc. 8.87% 23.67% 10.20% 7.27% 15.75%
Operating Profit Margin, Sector
Fixed Line Telecommunications 12.08% 25.05% 10.75% 9.30% 14.82%

Source: Based on data from Verizon Communications Inc. Annual Reports

2014 Calculations

1 Operating profit margin = 100 × Operating income ÷ Operating revenues
= 100 × 19,599 ÷ 127,079 = 15.42%

Ratio Description The company
Operating profit margin A profitability ratio calculated as operating income divided by revenue. Verizon Communications Inc.'s operating profit margin improved from 2012 to 2013 but then slightly deteriorated from 2013 to 2014 not reaching 2012 level.

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Net Profit Margin

Verizon Communications Inc., net profit margin calculation, comparison to benchmarks

 
Dec 31, 2014 Dec 31, 2013 Dec 31, 2012 Dec 31, 2011 Dec 31, 2010
Selected Financial Data (USD $ in millions)
Net income attributable to Verizon 9,625  11,497  875  2,404  2,549 
Operating revenues 127,079  120,550  115,846  110,875  106,565 
Ratio
Net profit margin1 7.57% 9.54% 0.76% 2.17% 2.39%
Benchmarks
Net Profit Margin, Competitors
AT&T Inc. 4.70% 14.17% 5.70% 3.11% 15.98%
Net Profit Margin, Sector
Fixed Line Telecommunications 6.11% 11.93% 3.35% 2.67% 9.71%

Source: Based on data from Verizon Communications Inc. Annual Reports

2014 Calculations

1 Net profit margin = 100 × Net income attributable to Verizon ÷ Operating revenues
= 100 × 9,625 ÷ 127,079 = 7.57%

Ratio Description The company
Net profit margin An indicator of profitability, calculated as net income divided by revenue. Verizon Communications Inc.'s net profit margin improved from 2012 to 2013 but then slightly deteriorated from 2013 to 2014.

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Return on Equity (ROE)

Verizon Communications Inc., ROE calculation, comparison to benchmarks

 
Dec 31, 2014 Dec 31, 2013 Dec 31, 2012 Dec 31, 2011 Dec 31, 2010
Selected Financial Data (USD $ in millions)
Net income attributable to Verizon 9,625  11,497  875  2,404  2,549 
Equity attributable to Verizon 12,298  38,836  33,157  35,970  38,569 
Ratio
ROE1 78.26% 29.60% 2.64% 6.68% 6.61%
Benchmarks
ROE, Competitors
AT&T Inc. 7.21% 20.06% 7.86% 3.74% 17.79%
ROE, Sector
Fixed Line Telecommunications 16.06% 22.91% 6.48% 4.49% 14.92%

Source: Based on data from Verizon Communications Inc. Annual Reports

2014 Calculations

1 ROE = 100 × Net income attributable to Verizon ÷ Equity attributable to Verizon
= 100 × 9,625 ÷ 12,298 = 78.26%

Ratio Description The company
ROE A profitability ratio calculated as net income divided by shareholders' equity. Verizon Communications Inc.'s ROE improved from 2012 to 2013 and from 2013 to 2014.

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Return on Assets (ROA)

Verizon Communications Inc., ROA calculation, comparison to benchmarks

 
Dec 31, 2014 Dec 31, 2013 Dec 31, 2012 Dec 31, 2011 Dec 31, 2010
Selected Financial Data (USD $ in millions)
Net income attributable to Verizon 9,625  11,497  875  2,404  2,549 
Total assets 232,708  274,098  225,222  230,461  220,005 
Ratio
ROA1 4.14% 4.19% 0.39% 1.04% 1.16%
Benchmarks
ROA, Competitors
AT&T Inc. 2.13% 6.57% 2.67% 1.46% 7.40%
ROA, Sector
Fixed Line Telecommunications 3.02% 5.39% 1.64% 1.27% 4.59%

Source: Based on data from Verizon Communications Inc. Annual Reports

2014 Calculations

1 ROA = 100 × Net income attributable to Verizon ÷ Total assets
= 100 × 9,625 ÷ 232,708 = 4.14%

Ratio Description The company
ROA A profitability ratio calculated as net income divided by total assets. Verizon Communications Inc.'s ROA improved from 2012 to 2013 but then slightly deteriorated from 2013 to 2014.

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