Which of the following ratios best measures the profitability of a company?

Question

Quizplus · Accepted Answer

Return on equity (ROE) measures the profitability of a company by calculating the amount of net income returned as a percentage of shareholders' equity. This ratio indicates how much profit a company generates for each dollar invested by shareholders. Gross margin measures the percentage of sales that exceeds the cost of goods sold, which is not a direct measure of profitability. Current ratio and net operating asset turnover are measures of a company's liquidity and efficiency, respectively, but not profitability.

Which of the Following Ratios Best Measures the Profitability of a Company