There are two statements marked as Assertion (A) and Reason (R). Mark your answer as per the options given below.

Assertion (A):  Profitability Ratios are the indicators of the profit-earning capacity of the firm.
Reason (R):  Profitability Ratios, i.e., Gross Profit Ratio, Operating Profit Ratio, Return on Investment Ratio, etc help in assessing the efficient use of a firm's resources to generate profit.

Both, Assertion (A) and Reason (R) are correct and Reason (R) is the correct explanation of Assertion (A).

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 8. Book value per share 9. Dividend payout ratio 10. Price earning ratio.