Answer : Gross profit margin

Financial ratios are one of the most common tools of managerial decision making. A ratio is the comparison of one number to another—mathematically, a simple division problem. Financial ratios involve the comparison of various figures from financial statements in order to gain information about a company’s performance.

Following are basic Types of Financial Ratios Used to Measure a Company’s Performance

Liquidity

The most common liquidity ratio is the current ratio, which is the ratio of current assets to current liabilities.

Profitability

Profitability ratios indicate management’s ability to convert sales dollars into profits and cash flow. The common ratios are gross margin, operating margin and net income margin.

Efficiency

Two common efficiency ratios are inventory turnover and receivables turnover. Inventory turnover is the ratio of cost of goods sold to inventory

PROFITABILITY RATIOS

Perhaps the type of ratios most often used and considered by those outside a firm are profitability ratios. Profitability ratios provide measures of profit performance that serve to evaluate the periodic financial success of a firm. One of the most widely-used financial ratios is margin ratio, also known as return on sales.
Thats why gross profit margin is best measure of operating effectiveness of a firm’s management