profitability ratios

Definition

A type of measurement that help to determine the ability of a company to generate earnings in comparison to its costs and expenses over a certain time period. The company with a higher profitability ratio than their competitors is considered to be doing well.

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I had to determine the profitability ratios and that was going to pose a problem because I did not know how.

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Cost cutting is a good strategy for increasing profitability ratios given that many large companies incur many unnecssary costs and expenses.

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As a CPA, I use profitability ratios as key indicator of how well a company is doing in my consulting as well as in my preliminary analytic of their financials.

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