Profitability ratios measure an organization's ability to:

Profitability ratios are financial metrics used to assess an organization's ability to generate profit relative to its revenue, assets, or equity over a specific period. The ability to convert sales into profits is a core function of profitability ratios, as they provide insights into the efficiency of a company in transforming its sales figures into actual financial gains.

For instance, common profitability ratios such as the net profit margin, return on assets, and return on equity focus on the outcomes of the sales process and how well those sales manage to contribute to overall profits. By examining these ratios, stakeholders can better understand how well the company is performing financially in relation to its sales activities and can identify areas for potential improvement or growth.

Other options, while important aspects of business operations, do not directly pertain to the measurement of profitability. For example, managing expenses effectively is more closely tied to cost management rather than profitability measurement itself. Similarly, managing inventory and increasing market share are operational and strategic goals that may affect profitability but do not directly constitute what profitability ratios are designed to measure.