Profitability Ratios

Profitability ratios are financial metrics that help assess a company's ability to generate profit relative to its sales, assets, or equity. Common ratios include the profit margin, which shows what portion of sales becomes profit; return on assets (ROA), indicating how effectively a company uses its assets to generate earnings; and return on equity (ROE), reflecting how well it utilizes shareholders' equity. These ratios provide insights into a company's financial health and operational efficiency, helping investors and stakeholders make informed decisions about its performance and profitability prospects.