What are profitability ratios?
Alan Williams 
It’s crucial for a company’s managers, current shareholders and potential shareholders to be able to gauge a firm’s financial health. Profitability ratios are metrics that provide that insight.
They are generally defined as financial metrics “used to evaluate a company’s performance when it comes to generating profits in relation to their revenue, balance sheets, operating costs, and investor’s equity during a specific accounting time in the business”. It is useful to track those ratios over time, compare them to your competitors’, and compare them to your industry averages.
This will give you a more defined idea of how your firm is performing–the numbers are meaningless in a vacuum. There are two categories of profitability ratios: margin and return ratios.
Internally, these figures will indicate where there is room for improvement in terms of generating revenue, being more cost-efficient, and using assets effectively.