Question

When it comes to finance and financial statement analysis, the term “profitability”….

Answer 1

Profitability

In a bussiness every organizations has aimed for maximize their wealth. Wealth here means maximize profit. Profit is an important thing in the business. Without profit no business can exits(expect non profit making organization). There for inorder to run the business there must be a profit.

Profit is an absolute number determined by the amount of income or expenses above and beyond the costs or expenses a company incurs. It is calculated as total revenue minus total expenses and appears on a companys income statement. A company's objective is always to make profit.

Profitability is ability of a company to use it's resources to generate revenue in excess of its expenses. Profitability is a degree to which a business or activity yields profit or financial gain. Profitability is closely related to profit. There is one main difference between profit and profitable that is profit is an absolute amount, profitability is a relative one. Profitability is a measurement of efficiency.

Profitability is one of the main building blocks for analysing financial statement and company performances. Others are efficiency, solvency etc. The two aspects of profitability are revenue and expenses. Revenue is income for the company. Resources like cash are used to pay the expenses of the company. ProfirProfita is measured net profit ratio and earnings per share ratio. The common profitability ratios used in analysing a company's performance include gross profit margin, operating

Profitability is very important term in financial statements. because it shows the overall profitability of the concern. Profitability statements can take several forms and it is essential to understand how they are prepared to make accurate analysis and interpretations.