Profitability
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Profitability is the ratio of profits from a strategy divided by the capital employed in that strategy. It is important to define clearly the elements in the equation, e.g. whether the profits are calculated before or after tax and before or after interest payments. This is often called the return on capital employed, shortened to ROCE.
Definitions
According to the Corporate Strategy by Lynch (4th edition),
- Profitability. The ratio of profits from a strategy divided by the capital employed in that strategy. It is important to define clearly the elements in the equation, e.g. whether the profits are calculated before or after tax and before or after interest payments. This is often called the return on capital employed, shortened to ROCE.
