profitability, liquidity, solvency, and valuation. Common ratios include the price-to-earnings (P/E) ratio, net profit margin, and debt-to-equity (D/E). Financial ratios are essential to solid ...

Definition: A profitability measure that evaluates the performance of a business by dividing net profit by net worth Return on investment, or ROI, is the most common profitability ratio.

The first ratio is net profit margin (net income divided by sales ... For example, that doesn't necessarily mean the company has a negative cash flow. As Johnson notes, "companies that are ...