Resources, like cash, are used to pay for expenses like employee payroll, rent, utilities, and other necessities in the production process. Businesses must use their resources in order to produce these products and provide these services.
This is the amount of money earned from customers by selling products or providing services. The two key aspects of profitability are revenues and expenses.
Investors, creditors, and managers use these key concepts to analyze how well a company is doing and the future potential it could have if operations were managed properly. The other three are efficiency, solvency, and market prospects. Profitability is one of four building blocks for analyzing financial statements and company performance as a whole. In other words, this is a company’s capability of generating profits from its operations. Definition: Profitability is ability of a company to use its resources to generate revenues in excess of its expenses.
