Profitability Ratios:
The basic objective/purpose of any business is to earn profit. Profit earning is essential for the survival of a business. A company required profit for its existence as well for its expansion and diversification of risk. A company can discharge its liabilities only by earning profit. Profitability ratios are used to measure the business performance and efficiency that how the different business operation are taken place. Stack holder of a company are interested in profitability ratio because it indicate the liquidity position or company’s ability to pay off its obligation and enhance its profit. Generally, profitability ratios are calculated in the relation to sales and profit.
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