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What is difference between profit and profitability?

Definition of profit

Profit is the positive amount left after subtracting expenses from revenue, during a specified period of time, and this is one of the basic measures of business viability, as it is closely monitored by investors and lenders, and the resulting profit may not match the amount of cash flows generated during the same reporting period, This is because some of the financial accounting processes required under the accrual basis of accounting do not match the cash flows, such as recording depreciation and amortization, and then the amount of profits is transferred to retained earnings that appear in the company’s balance sheet, so it is necessary to know the difference between profit and profitability, Achieving profitability can be very challenging for a startup company, as they are struggling to build a client base and are not yet sure of the most efficient way to operate.

Definition of profitability

 Profitability is defined as the company's ability to use its resources to generate revenue that exceeds its expenses, in other words, the company's ability to make profits from its operations. Profitability is one of the four basic building blocks for financial analysis of data and the performance of the company as a whole. The use of these basic concepts by investors, creditors and managers to analyze how well the company is performing and the future potential it might obtain if operations are managed properly, including the two main aspects of profitability, namely: revenue and expenses, so it is necessary to know the difference between profit and profitability as profitability looks at The relationship between revenues and expenses to see how well a company is performing and the company's potential future growth.

What is difference between profit and profitability?

What is difference between profit and profitability?
What is difference between profit and profitability?

Companies must know the difference between profit and profitability, although the two terms are used interchangeably, profit and profitability are not the same, although both are accounting measures used to analyze the financial success of the company, but there are clear differences between the two and therefore it is necessary to know the difference between profit and profitability to determine if a company is financially sound or ready for growth, so investors must first understand what distinguishes a company's profit from profitability.


Profit is an absolute number determined by the amount of income or revenue that exceeds costs or expenses made by the company, it is calculated as total revenue minus total expenses and appears in the company's revenue statement, regardless of the size or scope of the business or the industry in which it operates, the goal of the company is always is to make a profit.


While profitability is closely related to profit but with one main difference, as profit is an absolute amount, profitability is a relative value, it is the measure used to determine the scope of a company’s profit in relation to the size of the business, while profitability is a measure of efficiency and ultimately its success or failure, meaning Another is the ability of a business to produce a return on investment based on its resources as compared to an alternative investment, even though the company can make a profit this Does now no longer always imply that the business enterprise is profitable.

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