MANAGEMENT

Detailed explanation-1: -Profitability is a measure of an organization’s profit relative to its expenses. Organizations that are more efficient will realize more profit as a percentage of its expenses than a less-efficient organization, which must spend more to generate the same profit.

Detailed explanation-2: -profitability refers to the ability of the business to. earn a reasonable amount of income. working capital. the excess of the current assets of a business over its current liabilities.

Detailed explanation-3: -Profitability can be defined as either accounting profits or economic profits. Traditionally, farm profits have been computed by using “accounting profits”. To understand accounting profits, think of your income tax return. Your Schedule F provides a listing of your taxable income and deductible expenses.

Detailed explanation-4: -A further definition of profitability is a business’s ability to produce a return on an investment based on its resources in comparison with an alternative investment.

Detailed explanation-5: -The use of the term “return” in the ROA measure customarily refers to net profit or net income-the value of earnings from sales after all costs, expenses, and taxes. ROA is net income divided by total assets. The more assets a company has amassed, the more sales and potential profits the company may generate.