Which of the following ratios indicates profitability based on shareholder investment?

The Return on Equity (ROE) ratio is a key indicator of profitability based on shareholder investments. ROE measures how effectively a company uses the money invested by its shareholders to generate profits. It is calculated by dividing net income by the total equity of the shareholders. A higher ROE suggests that the company is efficient in generating earnings relative to the equity that shareholders have put in, signaling a good return on their investment.

This ratio serves as a vital performance metric for shareholders because it not only reflects the company's profitability but also the effectiveness of management in utilizing the equity provided by the investors. The other ratios mentioned, while relevant to profitability, do not specifically relate to shareholder investment. For instance, operating and net margin ratios focus on revenue and expenses but do not provide insight into equity efficiency, while the debt/EBITDA ratio assesses a company’s ability to manage its debt relative to earnings before interest, taxes, depreciation, and amortization, rather than profitability for equity holders.