What is profitability in accounting?

What is Profitability? Profitability is a situation in which an entity is generating a profit. Profitability arises when the aggregate amount of revenue is greater than the aggregate amount of expenses in a reporting period.

Is profitability sustainable?

Profitability can be achieved in the short term through the sale of assets that garner immediate gains. However, this type of profitability is not sustainable. An organization must have a business model that allows its ongoing operations to generate a profit, or else it will eventually fail.

What is the difference between profitability and resources?

Resources, like cash, are used to pay for expenses like employee payroll, rent, utilities, and other necessities in the production process. Profitability looks at the relationship between the revenues and expenses to see how well a company is performing and the future potential growth a company might have.

What is a company's capability of generating profits?

In other words, this is a company’s capability of generating profits from its operations. What Does Profitability Mean? Profitability is one of four building blocks for analyzing financial statements and company performance as a whole.