Calculating operating leverage using a cost ratio. Advantages of Buybacks. Profitability Index Pi Or Benefit Cost Ratio Money Concepts Investing Budgeting High operating leverage is an indicator for higher potential profit. . Profitability ratio example return on assets profit margin return on equity gross margin ratio and return on capital employed refer to how well can a company generate profits from its operations. The above mentioned is the concept that is elucidated in detail about the Advantages and Disadvantages of Ratio Analysis for the class 12 Commerce students. Ratio Analysis is a method to understand the liquidity position efficiency of operations profitability position and solvency of a business organization. Read more with the companys gross profit the gross profit ratio. The example below shows the impact on EPS if a company buys back 20 of its shares ie reduction of shares from 100000 to 80000. Ratio analys