Proﬁtability ratios are frequently used as a basis for evaluating management's operating effectiveness.

Question

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Profitability ratios, such as return on investment (ROI) and return on equity (ROE), are important measures of how effectively management is generating profits from the company's assets and investments. These ratios are often used by investors and analysts to evaluate a company's financial health and management's operating effectiveness.

Proﬁtability Ratios Are Frequently Used as a Basis for Evaluating