Profitability is a class of financial metrics that are used to assess a business’ ability to generate earnings as compared with expenses and other relevant costs incurred during a specific period of time.
In this section, we will look at four tests of profitability. They are: Net Income, Operating Cash Flow, Return on Assets and Quality of Earnings. From these four metrics, we will establish if the company is making money, and gauge the quality of the reported profits.
- Net Income 2011 = $1.049 billion
To pass, the company needs to have a positive net income. Parker Hannifin passes.
- Operating Cash Flow 2011 = $1.413 billion
Operating Cash Flow is the cash generated from the operations of a company, generally defined as revenue less all operating expenses, but calculated through a series of adjustments to net income.
To pass, the company needs to have a positive operating cash flow. Parker Hannifin passes.
To read more: Parker Hannifin: Inside The Numbers