Which of the following belong to the profitability ratios?

Which of the following belong to the profitability ratios?

a. Rate of return on equity

b. Rate of return on assets

c. All of the above

d. Gross Profit Margin

Answer: c. All of the above

Everything that has been pointed out, starting from the rate of return on equity, rate of return on assets up to the gross profit margin, can be referred to as the profitability ratios. profitability ratios are used for assessing the financial performance and efficiency of the company by analyzing the margin of profit earned. The rate of return based on equity refers to the amount of profit made against the shareholders’ equity, while the rate of return based on assets evaluates the ability of a firm in creating profit out of its assets. Whereas as the gross profit margin calculated by dividing the gross profit by sales revenue gives an insight to the percentage of overhead cost by giving a picture on the cost of manufacturing make the product company viable in its pricing strategy. These ratios are important in determining the efficiency of profitability of the business to investors, creditors and management to check the financial health of the business.