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The three profitability performance ratios are ______.Multiple select question.return on equityinventory turnoverearnings per sharecurrent ratioreturn on sales

Question

The three profitability performance ratios are ______.

  • return on equity
  • inventory turnover
  • earnings per share
  • current ratio
  • return on sales
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Solution

The three profitability performance ratios from the options provided are:

  1. Return on Equity (ROE): This ratio measures how effectively a company uses its equity to generate profit, calculated by dividing net income by shareholder's equity.

  2. Earnings Per Share (EPS): This indicates how much money a company makes for each share of its stock and is calculated by dividing net income by the number of outstanding shares.

  3. Return on Sales (ROS): This ratio measures the operating efficiency of a company, calculated by dividing operating income by net sales.

While "inventory turnover" and "current ratio" are important financial metrics, they do not specifically measure profitability. The former assesses how efficiently inventory is managed, and the latter is a liquidity ratio indicating a company's ability to cover its short-term obligations.

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