Profitability

Extracted Attributes

• Market Behavior

  Economic profits are non-existent in long-run perfectly competitive equilibrium

• Primary Metrics

  Return on Investment (ROI), Profit Margins, Ratios relative to sales, assets, or equity

• Measurement Type

  Relative measure of efficiency (Ratio)

• Economic Profit Formula

  Total Revenue - (Explicit Costs + Implicit Costs)

• Normal Profit Condition

  Total Revenue equals Total Costs (Zero Economic Profit)

• Accounting Profit Formula

  Total Revenue - Explicit Costs

Timeline

• All-In Podcast Episode 151 highlights a systemic shift in Silicon Valley where profitability is prioritized over growth amid a valuation reset. (Source: All-In Podcast Episode 151)

  2023-10-27

• US GDP Growth is reported at 4.9%, creating a divergence between macroeconomic data and the venture capital market's focus on profitability. (Source: All-In Podcast Episode 151)

  2023-10-26

• Projected date for future business blog discussions on profitability and market trends. (Source: Cambridge English Dictionary Web Search)

  2026-12-31

Profit (economics)

In economics, profit is the difference between revenue that an economic entity has received from its outputs and total costs of its inputs, also known as "surplus value". It is equal to total revenue minus total cost, including both explicit and implicit costs. It is different from accounting profit, which only relates to the explicit costs that appear on a firm's financial statements. An accountant measures the firm's accounting profit as the firm's total revenue minus only the firm's explicit costs. An economist includes all costs, both explicit and implicit costs, when analyzing a firm. Therefore, economic profit is smaller than accounting profit. Normal profit is often viewed in conjunction with economic profit. Normal profits in business refer to a situation where a company generates revenue that is equal to the total costs incurred in its operation, thus allowing it to remain operational in a competitive industry. It is the minimum profit level that a company can achieve to justify its continued operation in the market where there is competition. In order to determine if a company has achieved normal profit, they first have to calculate their economic profit. If the company's total revenue is equal to its total costs, then its economic profit is equal to zero and the company is in a state of normal profit. Normal profit occurs when resources are being used in the most efficient way at the highest and best use. Normal profit and economic profit are economic considerations while accounting profit refers to the profit a company reports on its financial statements each period. Economic profits arise in markets which are non-competitive and have significant barriers to entry, i.e. monopolies and oligopolies. The inefficiencies and lack of competition in these markets foster an environment where firms can set prices or quantities instead of being price-takers, which is what occurs in a perfectly competitive market. In a perfectly competitive market when long-run economic equilibrium is reached, economic profit would become non-existent, because there is no incentive for firms either to enter or to leave the industry.

Web Search Results

• PROFITABILITY definition | Cambridge English Dictionary

  /ˌprɒf.ɪ.təˈbɪl.ə.ti/ Add to word listAdd to word list the fact that something produces or is likely to produce a profit: The companyneeds to return to profitability very soon. They are reorganizing the company in order to improve profitability. See profitable More examples Fewer examples They are hoping to improveoverall profitability. She expresseddoubts about the future profitability of the stores. They have set a new plan to achieve profitability. SMART Vocabulary: related words and phrases Profits & losses [...] Profits & losses anti-profiteering anti-speculative be a license to print money idiom buoyancy buoyant cash cow ka-ching lose lose your shirt idiom margin moneymaker non-profit-making out-of-pocket pi pocket price something in phrasal verb profit rake-off trade surplus winnings See more results » (Definition of profitability from the Cambridge Advanced Learner's Dictionary & Thesaurus © Cambridge University Press) profitability | Business English profitability noun( uk Your browser doesn't support HTML5 audio /ˌprɒfɪtəˈbɪlɪti/us Your browser doesn't support HTML5 audio Add to word listAdd to word list COMMERCE, FINANCE the situation in which a company, product, etc. is producing a profit: [...] lønnsomhet [masculine]… See more Need a translator? Get a quick, free translation! Translator tool Browse profit-and-loss account profit-making profit-takers profit-taking profitability profitable profitably profiteer profiteering Test your vocabulary with our fun image quizzes Image 6: animals2_1 Try a quiz now More meanings of _profitability_ All profitability noun, at profitable customer profitability product profitability See all meanings Word of the Day throw yourself into something UK Your browser doesn't support HTML5 audio /θrəʊ/ US Your browser doesn't support HTML5 audio /θroʊ/ to do something actively and enthusiastically About this Image 8: Talking about death (Part 1) Blog Talking about death (Part 1) December 31, 2026

• Are Profit and Profitability the Same Thing? - University of Florida

  Profitability, on the other hand, is the size of the profit relative to the size of the business. Profitability measures how efficient the business is in using its resources to produce profit (rate of return on investment). Unlike profit, profitability is a relative measure of the success or failure of a business. It has more to do with the rate of return expected on an investment (capital), or the size of the return, compared to what could have been obtained from an alternative investment (such as putting your money in a risk-free certified deposit or buying government treasury bonds). The point to note is that it is possible for a business to generate a profit but not be profitable. In other words, profit is a necessary but insufficient criterion for a business to be profitable. [...] ## Definitions of "Profit" and "Profitability" Profit is the excess of revenue/income above the costs/expenses incurred in the process of producing the revenue/income. Profit is an absolute measure of the positive gain from an investment or business operation after subtracting all expenses. Put another way, it is the absolute amount of money a business makes after accounting for all expenses, and is calculated using the formula "Profit = Total Revenue – Total Expenses" as part of an Income Statement. Making a profit is what all businesses strive to do because without profit, the business will not survive in the long run. [...] The terms "profit" and "profitability" are used quite frequently in everyday talk to mean the same thing. We often hear someone say "my business made a profit last year" or "my business was profitable." But are the two statements equivalent? Does making a profit automatically mean that the business is profitable? The simple answer is no; the two statements are not necessarily equivalent. True, the definition of "profitable" means yielding a "profit," but the two words are quite different. For example, let us consider my conversation with an avocado grower who wanted to know how many trees per acre he could remove from his orchard and still make a profit if his orchard were affected by laurel wilt disease. My answer was, "You can remove several trees and still make a profit, but you can

• Profitability: Definition, Metrics and Calculation | Abacum

  ## Understanding Profitability Profitability can be defined in various ways, but at its core, it reflects the extent to which a company can generate profit from its operations. Profit's typically calculated as total revenue minus total expenses, and profitability ratios are used to assess this performance. These ratios help stakeholders evaluate the effectiveness of a company’s management in generating earnings relative to its sales, assets, or equity. [...] Profitability is one of the most important indicators of your company's financial success. By focusing on how profit relates to revenue, costs, and expenses, you gain a powerful advantage in managing resources and shaping strategy. Understanding profitability is essential for stakeholders, including investors, management, and analysts, as it influences decision-making and strategic planning. Climate-friendly investments are six times more likely to increase revenue than decrease it, while companies implementing comprehensive reinvention strategies report significantly higher profit margins. ## Understanding Profitability [...] ## Profitability Analysis Profitability analysis involves evaluating a company’s financial performance to identify strengths and weaknesses in its operations. This analysis can help management make informed decisions about resource allocation, strategic planning, and operational improvements. ### Methods of Profitability Analysis There are several methods and tools used in profitability analysis, including:

• How to Measure Business Profitability - U.S. Chamber of Commerce

  While often used interchangeably, profit and profitability are two distinct financial concepts. Profit is an absolute figure—how much your business earns after expenses, typically reported as gross, operating, or net profit. Profitability, on the other hand, measures efficiency, showing how well your business generates profit relative to revenue, assets, or equity. In short, profit reflects how much you earn, while profitability reveals how efficiently you earn. It’s also important to note that profit is not the same as cash flow. Read more: [How to Calculate Small Business Profit] ## When should a business assess its profitability? [...] By: Kirsten Capunay , Contributor Share Profitability is one of the most critical indicators of a business’s financial health. It not only reveals how much revenue you’re bringing in, but how efficiently you’re converting that income into profit. For small business owners, understanding profitability is essential for making informed decisions, attracting investment, and sustaining long-term growth. Here’s why profitability matters—and how you can measure it effectively. ## What is profitability? Profitability is the ratio between a business’s income and its expenses. Leaders can use this data to determine their business’s profitability through a cash flow statement, which details a business’s income and expenses during a particular accounting period. [...] At the end of the fiscal year: Reviewing profitability annually provides a clear picture of overall performance and helps shape next year’s financial strategy. It is also a key part of updating your financial plan. At quarterly check-ins: Regular quarterly reviews help you track progress toward short-term goals, adjust spending, and make timely decisions around growth opportunities. When considering a major business change: Launching a new product, changing pricing models, or entering new markets are all moments that warrant a profitability analysis to evaluate impact and guide next steps. Profitability analysis can model what-if scenarios for each of these events.

• Profitability Definition | Growfin AR Glossary

  Design By: Dhanush R ## Profitability Definition > Profitability refers to the ability of a business or investment to generate a profit, which is the difference between its revenues (net income) and expenses (costs). It measures the financial performance and success of companies and investments. The metric indicates how efficiently and effectively a company or investment utilizes its resources (such as net income) to generate earnings. High profitability is a positive indicator, as it suggests that a business effectively generates returns on its investments and manages its expenses. Alternatively, low profitability is an unfavorable indicator. ### Profitability Factors [...] In essence, profitability measures the relationship between revenue and the various costs incurred during business operations. Profit, on the other hand, refers to the actual monetary gain that remains after subtracting all costs and expenses from a company's revenue. It is the bottom line of financial statements, such as income statement, representing the tangible financial result of a business's activities. Profit can be divided into different categories, such as gross profit, operating profit, and net profit, each providing a distinct perspective on where costs come from and how revenue gets generated. [...] Profitability focuses on the relationship between revenue and expenses to determine how effectively a company is generating earnings. Profitability is crucial for long-term sustainability, as it indicates the ability to generate positive returns over time. However, profitability metrics are based on accrual accounting principles, which recognize revenue and expenses when they are incurred, not necessarily when cash changes hands.