Which of the following best describes what a profitability ratio is?
A)It shows the relative amount of funds in the business supplied by shareholders.
B)It indicates a company's ability to pay short-term debts.
C)It indicates management's ability to generate a financial return on sales or investment.
D)It shows a company's profit margins for the last six months.
E)It indicates a company's future profits from its current customer base.

Question

Quizplus · Accepted Answer

A profitability ratio is a financial ratio that indicates management's ability to generate a financial return on sales or investment. It measures a company's efficiency in using its resources to generate profits. Examples of profitability ratios include return on investment (ROI), return on assets (ROA), and return on equity (ROE).

Which of the Following Best Describes What a Profitability Ratio