Final answer:
Profitability ratios measure a business's ability to generate earnings, not its ability to pay bills, so the correct answer is false.
Step-by-step explanation:
Profitability ratios are financial metrics used primarily to assess a business's ability to generate earnings relative to its revenue, operating costs, balance sheet assets, or shareholders' equity over time, using data from a specific point in time. Thus, the statement that profitability ratios measure the ability to generate enough cash to pay bills is false. Instead, these ratios typically measure the efficiency of a company in managing its operations and assets to gain profit, much like how efficient a firm is in using its equity and assets to generate profits (Return on Equity and Return on Assets).
It's important for businesses to maintain profitability to make credible promises for paying interest, hence, allowing them to borrow money from banks or through bonds when needed. However, profitability ratios by themselves do not directly measure the liquidity or cash flow position which is related to paying off short-term obligations and bills.