Question

Kitsure, a cosmetics company, was able to sell 20 percent more than its estimated sales in a year. The company was able to acquire its investment along with a higher turnover for its shareholders. Which of the following financial ratios provides the measure of Kitsure's earnings?
A. Leverage ratios
B. Asset management ratios
C. Liquidity ratios
D. Profitability ratios

Answer 1

Answer:

D. Profitability Ratios

Explanation:

A profitability ratios are class of ratios that are used by investors, share holders and other stake holders of the company to access the business ability to generate profits and returns relative to its revenue, expenses and other associated costs.

Most common Profitability ratios are

• Gross profit margin
• Operating  profit margin
• Net Profit margin.

whereas:

Leverage ratio shows the company's debt level.

Asset management ratio tells how well the company is utilizing its assets to generate sale.

Liquidity ratios shows how much liquid assets or the company position to pay off its current liabilities falling due.