CPA LogoCPA Exam Prep

Profitability Ratios

Evaluating Earnings Performance

Profitability ratios measure a company's ability to generate profits from sales, assets, and shareholders' investments. These ratios are among the most important indicators for investors and management.

Note
Increasing profitability is generally positive only if it is achieved without excessive risk.
Summary
Profitability ratios measure how effectively a company converts revenue and investments into earnings.