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The Profinability Of Profitability

The profitability ratio is also an importance element in this research paper. Due to it is used to calculate a company's ability to make earnings. The author needs to calculate the company’s profits by deducting all of its expenses and other incurring costs during a specific period of time. If the company have high profitability ratio, which is means the company is perform well. For all the companies, their primary goals are same which is profitability because it will refers their capability to earn money. If without profitability the company will not survive in the long run, which is means that the company doesn’t earn money from their business. So, by measuring current, historical profitability as well as projecting future profitability…show more content…
The readers can predict the profitability of the company. It will help them enables to see which companies are going to keep abreast of their own operating situations in order to take effectively countermeasures. Moreover, the profitability prediction guides the investors to understand the corporate value and to make reasonable decisions while doing the investment.” (Zhang, 2015) The profitability ratios into two types: margins and returns. The margins will represent the company's ability to translate sales into profits at the stages of measurement. It will include how the company sell their products by minimizing the cost and maximizing the profits. Besides that, the ratios also show the company’s ability to measure the overall efficiency by generating returns for its shareholders. Thus, a higher value of profitability ratios means that the company is doing well and it is good at earning profits, revenues and cash flows. Profitability ratios are of little value in isolation. By comparing and analyzing the capability of competitors, the company can look at their own profitability compared to their competitors’ profitability because it will give them very useful and meaningful information. Therefore, the trend analysis and industry analysis are required to draw substantial conclusions about the profitability of a

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