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What are Profitability Ratios?

Profitability ratios are useful analytical tools to evaluate a company’s ability to generate profits relative to all costs and expenses.

A company that has high profitability ratios relative to competitors/peers, or a company that has demonstrated to improve their profitability ratios over time, is generally viewed as a healthy and attractive company from an ownership perspective. Some examples of profitability ratios are profit margin, return on assets, and return on equity.

Keywords: profits, corporate finance, ratios, profit margin, return on assets (ROA), profitability,