The main purpose of a business unit is to make profit. The profitability analysis is done to throw light on the current operating performance and efficiency of business firms. It should be duly noted that net income figure alone is not very helpful in determining the efficiency and performance of the business firm unless it is related to some other figures such as sales, cost of goods sold, operating expenses, capital invested etc. Thus the profitability ratios are calculated to enlighten the

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... d result and comparison of business firms which is the sole criterion of overall efficiency of business concern.