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Profitability Ratio

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Profitability Ratio
Any ratio that measures a company's ability to generate cash flow relative to some metric, often the amount invested in the company. Profitability ratios are useful in fundamental analysis which investigates the financial health of companies. An example of a profitability ratio is the return on investment which is the amount of revenue an investment generates as a percentage of the amount of capital invested over a given period of time. Other examples include return on sales, return on equity, and return on common stock equity.

profitability ratio
A comparison of two or more financial variables that provide a relative measure of a firm's income-earning performance. Profitability ratios are of interest to creditors, managers, and especially owners. Compare return on common stock equity, return on equity, return on investment, return on sales. See also common-size statement, gross profit margin, net profit margin.


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Asset quality ratios weakened this year but improving profitability ratios will enable the Bank to make higher provisions if required.
Byline: Tanvi Varma & Sameer Bhardwaj Summary: In the first in a new series on financial concepts, we explain one of the most important profitability ratios return on equity its usefulness and constraints.
As per Moody's the improved asset quality, the maintenance of healthy interest margins and the expected continued good profitability ratios in the short to medium term supported the continuance of the existing ratings accorded to the bank by the rating agency.
 
 
 
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