Uses and Limitations of Profitability Ratio Analysis in Managerial Practice

The evaluation of profitability performance appears an important lesson for our managers. Numerical measures of performance are valuable tools, but their use must be kept in perspective. It is short-sighed to manage strictly by the numbers. Executives need to take broader, more qualitative view of the evaluation process. Firms are too complicated to allow the substitution of mechanical rules for creative thought. In my paper will be presented the quantitative and qualitative approach to the profitability ratio analysis, as well as the uses and limitations of profitability ratios in managerial practice.