Profitability Ratios

Profitability reflects the final result of a company’s business operations. Profitability Ratios are also called Income Statement Ratios since most of the items used in their calculations are picked up from the Income Statement. Profit margin ratios and rate of return ratios are the most commonly used profitability ratios. A comparison of profitability ratios with other competitors in the same industry can reveal relative strengths or weaknesses of a business.