Definition: Profitability is ability of a company to use its resources to generate revenues in excess of its expenses. In other words, this is a company’s capability of generating profits from its operations.

Profitability is a situation in which an entity is generating a profit. Profitability arises when the aggregate amount of revenue is greater than the aggregate amount of expenses in a reporting period.

Accounting Profitability: Accounting profitability, sometimes referred to as net profit, is the measure of a company’s income after all expenses and taxes have been paid. It is calculated by subtracting total expenses from total revenue generated.

Profitability ratios are used to measure and evaluate the ability of a company to generate income (profit) relative to revenue, balance sheet assets, operating costs, and shareholders' equity during a specific period of time.