Profitability ratios
A)show the relative amount of funds in the business supplied by creditors and shareholders.
B)indicate a company's ability to pay short-term debts.
C)indicate management's ability to generate a financial return on sales or investment.
D)show the profit margins for the last six months.
E)indicate the future profits from the current customer base.

Question

Quizplus · Accepted Answer

Profitability ratios are used to measure the management's ability to generate a financial return on sales or investment. Examples of profitability ratios include return on assets, return on equity, and gross profit margin.

Therefore, option A is incorrect as it refers to capital structure ratios, option B is incorrect as it refers to liquidity ratios, option D is incorrect as it refers to margin ratios, and option E is incorrect as it does not represent any specific financial ratio.

Profitability Ratios