Profit vs Profitability

Profit is distinct from profitability. Profit is the amount of money the company makes each year. It is a measure of output. Profitability measures the amount of equity (or shareholders funds) required to generate that profit. In other words, it measures the amount of input required to produce the output. There are several ways to view profitability: 1. In a single year the measure of profitability of a company is the NROE. 2. Over several years the measure of profitability of a company is calculated as the Average NROE. StocksinValue takes an average of the last five years to calculate the Average NROE.

Related definitions:

FS NROE

NROE – Normalised Return on Equity

Value Investing

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