Profitability is the ability of a company or business to generate revenue over and above its expenses. It is usually measured using ratios like gross profit margin, net profit margin EBITDA, etc.

Formulaically, the structure of a profitability ratio consists of a profit metric divided by revenue. Profitability Ratio = Profit Metric ÷ Revenue The resulting figure must then be multiplied by 100 to convert the ratio into percentage form.