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Profitability and profit

Differences between Profit and Profitability
Differences between Profit and Profitability

The Differences between Profit and Profitability are given here. Utility and profitability are related terms depending on the field in which they are used. They are generally much more confused in economics.

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Utility

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

The utility 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 the generation of this income. It is also known as an 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 expense of book time, and business assets.

Cost-effectiveness

Profitability is the ability to produce an additional benefit on top of the investment or effort made.

In the economic aspect, profitability is the benefit compared to the total of 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 rate of repayment that produces an economic benefit before and after interest and taxes in relation to total capital, including all borrowed and equity.

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

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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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