Profitability may be defined as:
A) The ability to pay the debts of the company as they fall due.
B) The ability to increase retained earnings.
C) Distributing dividends.
D) Having excess cash.

Question

Quizplus · Accepted Answer

Profitability is the ability of a company to generate earnings relative to its expenses and other costs. Increasing retained earnings by generating profits is a key indicator of business profitability. Options A, C, and D are not comprehensive definitions of profitability as they only cover specific aspects, such as liquidity, distribution of profits, and cash reserves, respectively.

Profitability May Be Defined As