Question

what do the profitability ratios mean to shareholders?

Answer 1

Ans:

Profitabilty ratio are the ratios , in which profits are compared with sales. There are different types of profitability ratios, such as:

• Gross profit ratio
• Net profit ratio
• Return on investments
• operating profit ratio
• return on equity.

Shareholders are the persons who put their money to run businesses. They are the backbone of every business. Profitabilty ratios provide information to shareholders about how the company is performing. Comparing profits from last year's profit help shareholder to stay confident and transparent in their investments. Shareholders analise the actual profit with their expected profit from the investment made by them. So profitabilty ratios are very important for shareholders to decide in which company the money should be invested.