Business

What is the difference between profit and profitability?

Both have been related terms depending on the field in which they are used. They are usually confused in the area of ​​economics.

What is Profit?

From a general point of view, it is the property by which a thing or action acquires the condition of having a useful heat to satisfy numerous human needs.

Profit is a criterion that allows finding the optimal point of Pareto efficiency. At this point, it is only possible to benefit more elements of a system without affecting others. In computing, it is a support tool that allows you to build and run programs.

For accounting or economics it is known as profit, it is the difference between the income obtained and the expenses incurred in generating this income. It is also known as economic benefit.

With the increase or decrease in profit, the economic behavior of a business can be explained. It will depend on the consumption of goods and services, the cost of book time and business assets.

What is Profitability?

It is the ability to produce an additional benefit above the investment or effort made.

 In the economic area, profitability is the benefit compared to the total resources used to achieve these benefits. In the case of financial profitability we have the benefit compared to the personal resources invested to achieve such benefit.

Economic profitability measures the return rate that produces an economic benefit before and after interest and taxes in relation to the total capital, including everything borrowed and net worth.

This capacity indicates the capacity that a company has with its assets to generate profits. It is also interpreted as the return obtained by the company for each monetary unit invested in the productive activity.

Differences between Profit and profitability

  • The Profit is the difference between the income and expenses of the entity.
  • It is the relationship between the economic benefit of the company and its assets.

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