Accountancy Part BAccounting Ratios

Earning Capacity of a Company is measured by:

Answer & explanation

Correct answer: option 2

The correct answer is Option (2) → Profitability Ratio

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.”