What is profitability ratio? Give examples. (500 words)

- Specify a profitability ratio- a ratio of financial significance to evaluate a company’s profitability and its overall efficiency.
- Write about the two main profitability ratio groups.
- Gross margin - the indicator used for determining the profitability once production costs has been subtracted.
- Operating margin - it's a profit presented after operating expenses are deducted from sales.
- The profit margin – the amount of profit available after deducting all costs from the total sales figure.
- Return on Assets or ROA - seeing how efficient the exploitation of assets to create profits is
- Name your example of how these ratios are utilized to assess a company.
- Thus, Company XYZ shows a gross margin of 40% vs an industry average of 30%, proving that it is more prone to a higher level of profitability at the stage of revenue generation and manufacturing costs.
- List the possible consequences of some financial ratios such as efficiency, competitiveness, etc.