Learn in the textbookBusiness Analysis Metrics
DefinitionProfitability (収益性) is the business-analysis viewpoint that looks at how much profit a company earns relative to its sales or capital.
ExplanationIt is measured as a ratio of profit to a base amount such as sales or capital, and a higher ratio means a stronger ability to earn. The ratio to sales is the profit-to-sales ratio and the ratio to capital is the return on capital, and return on investment, covered next, is one kind of return on capital. The name of the indicator changes with the profit used as the numerator, such as operating profit or net income for the period.
AnalogyEven with the same day's sales, the shop that keeps more in hand after paying for materials and rent is seen as the stronger earner.