What does the term 'performance ratio' typically refer to?

The term 'performance ratio' typically refers to a financial metric that assesses a company's profitability. It is used to evaluate how well a company is generating profit relative to various aspects of its financial performance, such as revenue, assets, or equity. This could include ratios such as return on equity (ROE) or return on assets (ROA), which help stakeholders understand how effectively the company is using its resources to generate earnings. By focusing on profitability, performance ratios provide valuable insights for investors and management regarding the financial health and operational effectiveness of the organization.