The correct answer is Option (2) → Proprietary Ratio
Profitability ratios measure the earning capacity of the business. The Proprietary Ratio compares shareholders' funds with capital employed (or total assets); it shows how far the assets are financed by the owners, so it is a solvency ratio.
Option (1) Operating profit-Ratio — A profitability ratio. It relates operating profit to revenue from operations.
Option (2) Proprietary Ratio — Correct. It is a solvency ratio, not a profitability ratio.
Option (3) Earning per share ratio — A profitability ratio. It shows the profit earned on each equity share.
Option (4) Return on Investment Ratio — A profitability ratio. It relates profit before interest and tax to capital employed.
NCERT (2026-27 edition):
Profitability Ratios – “The profitability or financial performance is mainly summarised in the statement of profit and loss. Profitability ratios are calculated to analyse the earning capacity of the business which is the outcome of utilisation of resources employed in the business. There is a close relationship between the profit and the efficiency with which the resources employed in the business are utilised. The various ratios which are commonly used to analyse the profitability of the business are: 1. Gross profit ratio 2. Operating ratio 3. Operating profit ratio 4. Net profit ratio 5. Return on Investment (ROI) or Return on Capital Employed (ROCE) 6. Return on Net Worth (RONW) 7. Earnings per share …” NCERT (2026-27 edition):
Solvency Ratios – “… Solvency ratios are calculated to determine the ability of the business to service its debt in the long run. The following ratios are normally computed for evaluating solvency of the business. 1. Debt-Equity Ratio; 2. Debt to Capital Employed Ratio; 3. Proprietary Ratio; …” |
