_____ ratios are designed to evaluate a firm's ability to generate revenues in excess of operating costs and other expenses.
A)Activity
B)Liquidity
C)Profitability
D)Debt

Question

Quizplus · Accepted Answer

Profitability ratios are the ratios that assess a company's ability to generate profit relative to its revenue, operating costs, and investments. Profitability ratios include ratios like gross profit margin, net profit margin, return on equity (ROE), and return on assets (ROA). These ratios are used to evaluate the company's potential to generate profit in the future and are important for investors and creditors. The other ratios listed - activity, liquidity, and debt - focus on different aspects of a company's financial health.

_____ Ratios Are Designed to Evaluate a Firm's Ability to Generate