Which of the following is a profitability ratio?

The correct answer is - Price-earning ratio

Key Points

• Price-earning ratio
  • The Price-earning ratio (P/E ratio) is a measure of the market value of a company's stock relative to its earnings.
  • It is calculated as the current market price of the stock divided by its earnings per share (EPS).
  • This ratio helps investors determine the market's valuation of a company's profitability and growth prospects.
  • A high P/E ratio may indicate that the stock is overvalued, or that investors are expecting high growth rates in the future.
  • A low P/E ratio may suggest that the stock is undervalued or that the company is experiencing difficulties.

Additional Information

• Proprietary ratio
  • It is a financial ratio that indicates the proportion of shareholders' equity to total assets.
  • This ratio helps to understand the long-term financial stability of the company.
• Debt-Equity ratio
  • This ratio measures the relative proportion of shareholders' equity and debt used to finance a company's assets.
  • A higher ratio indicates higher financial risk due to greater debt.
• Fixed assets turnover ratio
  • This ratio measures a company's efficiency in using its fixed assets to generate sales revenue.
  • A higher ratio indicates better utilization of fixed assets.