PROFITABILITY
RATIOS
BY MUHAMMAD AQEEB UR REHMAN
VUID IS BC180405347
VIRTUAL UNIVERSITY OF PAKISTAN
JUNE 03, 2023
TABLE OF CONTENTS
1.CHAPTER-1------------------------------------------------------------------ PAGE-01
1.1 Introduction ---------------------------------------------------------- PAGE-01
1.2 Background ---------------------------------------------------------- PAGE-02
1.3 Objectives ------------------------------------------------------------ PAGE-03
1.4 Significance ---------------------------------------------------------- PAGE-04
2.CHAPTER-2------------------------------------------------------------------- PAGE-05
2.1 Project Proceeding -------------------------------------------------- PAGE-05
3.CHAPTER-3 --------------------Methodology----------------------------- PAGE-06
3.1 Type of research ----------------------------------------------------- PAGE-06
3.2 Data Collection Source --------------------------------------------- PAGE-07
3.3 Data Collection Tools ----------------------------------------------- PAGE-07
3.4 Subjects --------------------------------------------------------------- PAGE-07
3.5 Data Collection ------------------------------------------------------ PAGE-07
3.6 Conclusion ----------------------------------------------------------- PAGE-08
(CHAPTER-1)
(1.1) INTRODUCTION
 Profitability ratios are used to evaluate a company’s ability to generate profits,
efficiency and effectiveness in relation to sales, assets or equities. Profitability ratios
are the most important tools for Investors, Creditors and management to evaluate a
company’s financial health and its growth. Profitability ratios are used to assess a
company’s current performance with its past, or with other companies or used in
determining the industry average.
 This project is all about for an investor, for a businessman and for every single
person who is interesting in financing because these ratios give the ability to know
that what is current situation of any business or any firm.
 In accountancy all the calculations and processes proceed to know that how much
we gain profit & loss. This research gives us the knowledge of getting some ratios
which describe the situation of business in advance.
My research proposal is about HM Sons PVT LTD which have a wide network of tiles
and sanatory wares in all over Pakistan and recently I’m working here as a junior
accountant. I’ve some working of my previous month in which I’ve calculated net profit
by the supporting of P&L and balance sheet. I will show all my working below in related
section.
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(1.2) BACKGROUND
Background of the research shows the impact and implication of the Profitability
Ratios on the environment. Profitability is a critical aspect of corporate financial
performance. Profitability ratios are commonly used to measure a company's ability
to generate profits relative to its sales, assets, or equity. These ratios help investors,
creditors, and management evaluate a company's financial health and performance.
However, little research has been conducted to explore the relationship between
profitability ratios and corporate financial performance. This study aims to bridge
this gap by examining the impact of profitability ratios on corporate financial
performance.
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(1.3) OBJECTIVES
 To examine the importance of profitability ratios in evaluating financial
performance.
 To identify the most commonly used profitability ratios and their components.
 To evaluate the relationship between profitability ratios and corporate
financial performance.
 To determine the impact of profitability ratios on small business success.
 To explore how different industries and sectors affect the relationship between
profitability ratios and financial performance.
 To investigate how profitability ratios are used by companies to make
informed financial decisions.
 To recommend best practices for using profitability ratios to improve financial
performance.
 To contribute to the academic literature on the relationship between
profitability ratios and financial performance.
 Overall, the objective of a research proposal on profitability ratios is to
provide insights into the importance of profitability ratios in evaluating
financial performance, the factors that affect their relationship with financial
performance, and how companies can use these ratios to improve their
financial performance.
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(1.4) SIGNIFICANCE




Profitability ratios indicates the problems.
Helps out in saving the money.
Shows the performance of company.
Final measure of profit & loss.
EXPECTED OUTCOME
The findings of this study will contribute to a better understanding of the relationship
between profitability ratios and small business success. The results will identify how
small businesses use profitability ratios to measure their financial performance and
the impact of these ratios on their success. The study's findings will help small
business owners and financial professionals better understand the importance of
profitability ratios in managing and improving small business performance.
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CHAPTER-2
PROJECT PROCEEDING (as sample)
All the ratios of profitability are as follows:
NET PROFIT MARGIN = NET INCOME / TOTAL SALES
GROSS PROFIT MARGIN = REVENUE-COGS/REVENUE
RETURN ON ASSETS = NET INCOME / TOTAL ASSETS
RETURN ON EQUITY = NET INCOME / TOTAL EQUITY
RETURN ON C
APITAL INVESTED = EBIT / TOTAL EMPLOYED CAPITAL
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(CHAPTER-3)
METHODOLOGY
3.1 This study will use a qualitative research design to explore the effect of
profitability ratios on small business success. Data will be collected through in-depth
interviews with small business owners and financial professionals. The participants
will be selected from different industries to obtain a diverse perspective on the use
of profitability ratios in small businesses. The data collected will be analyzed using
thematic analysis to identify themes and patterns. Here, I’ve a sample of my final report
in which I’ve conclude net profit in the presence of all expenses as follows:
HM SONS P & L FEB 23
Remarks
Debit
MISC-FARE A/C
MISC-UTILITY BILLS
MISC-DONATION
MISC-CUSTOMER REFERSHMENT
MISC-FUEL EXP
AUDIT EXP
FIX ASSTE A/C
SALARY
MISC-RENT
(GODOWN/SHOWROOM)
MISC-GODOWN EXP
MISC-LABOUR EXP
MISC-OFFICE EXP
MISC-BUILTY/FARE EXP
(OUTSTATION)
MISC-KITCHEN EXP (FOOD)
BREAKED TILE LOSS
15 UFONE SIMS
TOTAL
DAILY M
62,450
71,240
1,987
1,010
4,280
50,000
50,000
464,166
7,750
1,000
210,000
4,500
1744853
-2,649
P/L
1411812
REVALUATION
-437,474
NET P/L
-107,082
696,000
22,150
71,400
26,920
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3.2
NOTE: I’ve got all the above-mentioned info. from related ledgers of our
company (HM SONS PVT LTD).
H.M SONS PVT LTD. (n.d.). Title Company in Rawalpindi. https://hm-sons-pvt-ltd.business.site/
3.3 All records are calculated on my own, source tool was our accounts software.
I’ve saved a lot of time by using this software it generates all required ledgers in
few seconds for me. Instead of the using this software MICROSOFT OFFICE
(word, excel etc.) are used for working on this project.
3.4 I’m targeting contractors, dealers, and walking customers for enhancing my
profitability.
REGIONAL HEAD, BRANCH MANAGERS, SUPERVISORS,
EXTERNAL AUDITOR, ACCOUNTS RELATED STAFF AND SALES
EXECUTIVE.
The focus of my analysis is all about the organization which is a limited
company and all the data I’ve collected is from the organization named as HM
SONS PVT LTD where I’m recently working. The whole market competitor were
in my sight during the research all behavior and stability of market in my area was
observed that how the entrepreneurs play tricks for maximizing their profit
margins. I’ve analyzed our firm by working on 4P’s of business framework which
are Price, Place, Product and Promotion because these are the main factors for
running a business.
3.5
Data collected by approaching some persons who were related to our field
like accountants of other firms. Due to good social relationship in market, we will
assure that all data which is received is not fake by observing their previous
records. Practically all the issue will be written down, by the guidelines of the
instructor and with the teamwork I will try to solve every issue.
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CONLUSION
Overall, this research proposal aims to explore the effect of profitability ratios on
small business success. By conducting this study, we can better understand the
significance of profitability ratios in small businesses and their role in improving
financial performance. The study's findings will help small business owners and
financial professionals make informed decisions to improve profitability and drive
business success. For analysis and data entry main supporting software will be
EXCEL, POWER POINT etc. will be in use. Every technique, which will relate
with our topic will be used according to the availability of time.
THANK YOU!
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