Profitability ratios indicate:
I. How productively is the firm utilizing its assets.
II. How liquid is the firm.
III. How profitable is the firm.
IV. How highly is the firm valued by the investors.

Question

Profitability ratios indicate:
I. How productively is the firm utilizing its assets. 
II. How liquid is the firm.
III. How profitable is the firm.
IV. How highly is the firm valued by the investors.

Quizplus · Accepted Answer

Profitability ratios mainly indicate how profitable the firm is, which is choice III. The other choices, such as asset productivity (I), liquidity (II), and valuation by investors (IV) are measured by other types of ratios.

Profitability Ratios Indicate: I. How Productively Is the Firm Utilizing Its Assets