The financial services industry has provided the overall framework for investors seeking steady growth and income for decades, despite the crisis of 2008 spurred his mismanagement. The organisations which provide banking and insurance services, asset management, lending and credit services, brokerage operations account for a significant portion of gross domestic product (GDP) annually, and they can have a big impact on the overall performance of the stock market.
Companies in the financial services industry, have extensive experience consistency in return and stable dividend payments to investors, but not all companies in this sector are created equal. This is clearly seen in a wide range of profitability of sub-sectors and specific companies. For example, although average profit margins for the financial services industry can be 14.71%, return in more concentrated sub-sectors in the industry ranges from 5.1% to 40.5%.
To determine whether investment in the financial services industry is acceptable from the point of view of the tradeoff between risk and return, analysis of the industry management cost by analyzing its profitability. The profit of the company is calculated by dividing the company’s net income by its total revenue and is expressed as a percentage. Most investors think higher margins are more desirable, whereas a smaller percentage can mean that the company does not generate sufficient revenues to cover its operating expenses. Analysis of profit of the enterprise is not the only way the investor can determine the profitability, but this metric gives a more complete picture than the analysis only the net profit.
(For associated reading, see that it is good profit for a Mature business?)