Profitability is the ability of your business to earn a profit. A profit is what's left of your generated revenue after you pay all your expenses, such as the ones involved in producing your product.
So how do you analyze profitability? You want to generate enough revenue to more than cover the expenses you incur. Let's look at the primary analytical approaches:
Although the terms profitability and profits are sometimes used interchangeably, they aren't the same. What differentiates your company's profit from its profitability?
What can you do, then, to increase profitability and your company's overall growth?
Without profitability, your business will not survive in the long run. Measuring current and past profitability and projecting future profitability is key. When you're highly profitable, you can be rewarded with a large return on investment.
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