The Importance Of Profability And Profitability

Most businesses establish for the purpose of generating profit so they use different strategies to reach customer satisfaction. Firms establish the best suitable strategy that can generate the maximum rate of profitability. However, it is not simple to reach the stability stage in the business where the business achieve its target profit and can move forward unless the business pass through numbers of stages. Every business regarding it is new or old, small or large, it aims to generate profit. When the purpose became about profit, the management of the firms had to give a huge attention to profitability. The importance of profitability appears in every stage in the business so the management or the owners should have enough knowledge about profitability. Because of the aggressive competition in the market, the companies must compare their performance with the other companies to measure its progress. So it is not enough to have enough knowledge about profitability as it appears that management should know how to analyze its performance and measure it. Because of this reasons, the importance of profitability ratio analysis began to appear. Where they give the companies the chance to measure how good they really are comparing to the others firms in terms of profitability. When the organization starts to work on increasing its

While (Heyne, 2008) defined efficiency in the perspective of economics as the relationship between what the organizations want to achieve and the resources that the firms used to achieve this goals. It measures the relationship between the value of the goals achieved and the values of the resource