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Profitability is assessed relative to costs and expenses. It's analyzed in comparison to assets to see how effective a company is at deploying assets to generate sales and profits.
Profitability refers to a company's ability to generate revenue that exceeds its expenses. Ratios such as gross profit margin, net profit margin, and EBITDA are commonly used to assess profitability.
What are Profitability Ratios? Profitability ratios are financial metrics used by analysts and investors to measure and evaluate the ability of a company to generate income (profit) relative to revenue, balance sheet assets, operating costs, and shareholders’ equity during a specific period of time.