Final answer:
The profitability ratios among the options given are a. Return on assets (ROA) and c. Gross profit ratio. These ratios assess a company's ability to generate earnings in relation to its assets and revenues, respectively. The other options listed pertain to liquidity, valuation, and income coverage but are not profitability ratios.
Step-by-step explanation:
Profitability ratios are financial metrics used to assess a business's ability to generate profit relative to its revenue, operating costs, balance sheet assets, or shareholders' equity over a specific period of time. In the context of the student's question, which is seeking to identify the profitability ratios, the correct options are:
- a. Return on assets (ROA)
- c. Gross profit ratio
Return on assets (ROA) measures a company's net income in relation to its total assets, giving an idea of how effective the company is at using its assets to generate earnings. The gross profit ratio, also known as gross margin ratio, measures the proportion of money left over from revenues after accounting for the cost of goods sold (COGS). Both of these ratios help investors and analysts understand the company's financial performance in terms of profitability.
On the other hand, the interest earned ratio assesses a company's ability to meet its interest expenses with its earnings before interest and taxes (EBIT). The current ratio is a liquidity ratio that measures a company's ability to pay short-term obligations with its current assets. The price-earnings ratio relates a company's share price to its earnings per share, providing insight into the market's valuation of the company but it's not a measure of profitability.