What is the primary purpose of profitability ratios?

The primary purpose of profitability ratios is to show the relationship between income or revenues and investments and assets. These ratios are essential metrics used by businesses to evaluate their ability to generate profit in relation to their sales, assets, and equity. By measuring profitability, such as through gross margin, operating margin, and net profit margin, companies can gain insights into their financial performance and operational efficiency.

Profitability ratios help stakeholders understand how well a company converts its sales revenue into actual profit, which is crucial for assessing the company's viability, sustainability, and potential for growth. These ratios can also guide management in making decisions about pricing, budgeting, and investment strategies, ultimately impacting the company's financial health and performance in the market.

Other options focus on aspects that are not the core aim of profitability ratios. For example, analyzing market share or employee satisfaction levels doesn't directly reflect how efficiently a company is generating profit relative to its investments and revenue. Similarly, assessing the relationship between expenses and liabilities pertains more to financial leverage and risk management rather than profitability metrics. Thus, option B accurately captures the essence of what profitability ratios represent in financial analysis.