A Profitability Ratio is a financial metric used to assess a company's ability to generate profit relative to its revenue, assets, or equity. These ratios help investors and analysts evaluate how efficiently a company is operating and its overall financial health. Common types of profitability ratios include net profit margin, return on assets (ROA), and return on equity (ROE). By analyzing profitability ratios, stakeholders can make informed decisions about investing in or managing a business. A higher profitability ratio indicates better performance, while a lower ratio may signal potential issues. Understanding these ratios is essential for evaluating a company's success in generating profits.