Practicing Success
Earning Capacity of a Company is measured by: |
Working Capital Ratio Profitability Ratio Solvency Ratio Liquidity Ratio |
Profitability Ratio |
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: |