Corporate Profitability Analysis

The efficiency of the business is measured by the amount of profit earned. The greater the profit the more efficient is the business considered to be. The profit of a business may be measured by studying the profitability of investment. Profitability is a relative term and its relation with the other factor by which the profit is affected. It is the test of efficiency powerful motivational factor and the measure of control in any business. In the financial statement analysis literature a lot of importance has been attached to financial ratios for assessing a firms financial performance and condition. Items of the income statement alone or along with the balance sheet items also can generate a number of profitability ratios. But many ratios reveal the similar things.