Which profitability ratio reflects the return on capital invested by owners or shareholders?

The ratio that reflects the return on capital invested by owners or shareholders is the return on capital employed (ROCE). This ratio measures a company's profitability and the efficiency with which it uses capital to generate profits. It is calculated by dividing the operating profit of the business by the capital employed, which typically includes both equity and debt financing.

By focusing on the return generated from the capital that the owners have invested, ROCE provides valuable insights for shareholders. A higher ROCE indicates that the business is effectively using its capital to generate profit, which is a key indicator of financial health and managerial efficiency. This ratio is particularly relevant for equity investors as it directly relates to their investment's performance.

In contrast, other ratios like the current ratio primarily assess liquidity rather than profitability, while net profit percentage and gross profit percentage evaluate profitability in relation to sales but do not encompass the overall capital employed in the business. Therefore, return on capital employed is the most relevant measure for assessing returns specifically attributable to owners or shareholders' invested capital.