Briefly describe the ratios that can be used to evaluate a company’s profitability.

The profitability ratios are the ratios that determine a company's power to produce revenue concerning its outlays and other expenses incurred in income production during a specific timeframe. This ratio can determine the company's ultimate performance.

This ratio evaluates the profitability of the equity fund that the corporation has invested in the business. The higher the ratio, the better it is.

$Return on equity=\frac{\mathbf{ProfitafterTax}}{\mathbf{Networth}}$

This ratio calculates the amount each shareholder can earn on the company's net income according to the number of shares they have. A higher proportion indicates a better company.

$Earning per share=\frac{\mathbf{NetProfit}}{\mathbf{Totalno}\mathbf{.}\mathbf{ofsharesoutstanding}}$

This ratio calculates the percentage of the money a business earns by how efficiently using the capital invested in the company. A higher ratio is considered better.

$Return on capital employed=\frac{\mathbf{NetOperatingProfit}}{Capital employed}\mathbf{\times }\mathbf{100}$

This ratio calculates the rate of return a company earns by using the company's assets efficiently. A high ratio indicates that a company is doing better.

$Return on Assets=\frac{\mathbf{NetProfit}}{Total Assets}$

This ratio calculates the percentage of profit a company earns on its selling price. A high ratio helps the corporation since it indicates a higher profit margin.

$Gross profit ratio=\frac{\mathbf{GrossProfit}}{\mathbf{Sales}}\mathbf{\times }\mathbf{100}$