Profitability is linked to obtaining a profit from an investment.
The dictionary of the Royal Spanish Academy ( RAE ) defines profitability as the condition of profitability and the ability to generate income (profit, profit, profit, utility). Profitability, therefore, is associated with obtaining profits from a certain investment .
Typically, profitability refers to the economic gains obtained through the use of certain resources . It is usually expressed in percentage terms.
Let's take the case of a bakery that, to produce each kilogram of bread that it sells for 20 pesos , needs to invest 15 pesos . This figure includes raw materials, spending on electricity and gas, taxes , etc. In this way, the bakery obtains a profitability of 5 pesos for each kilogram of bread it sells.
Examples of profitability
It is known as economic profitability , in short, the return obtained from investments. In other words: profitability reflects the profit generated by each peso (dollar, euro, yen, etc.) invested. Suppose that the ratio of a company
Profitability can also be associated with the interest generated by a financial investment . A bank can offer a 10% return to clients who deposit money over a fixed period. In this way, the person who deposits $1,000 in a thirty-day fixed term will receive $1,100 at maturity. Therefore, you will earn $100 because the guaranteed return on the investment you made ( $1,000 over a fixed period) was 10% .
Companies usually aim to maximize their profitability.
The concept applied to the social
Social profitability , for its part, is a phenomenon that occurs when the development of an activity offers benefits in a magnitude greater than the losses, to the entire society, regardless of whether it is profitable from an economic point of view for the promoter. This concept is opposite to that of economic profitability, defined in a previous paragraph, since in that case it only matters if the activity is beneficial for its promoter.
A widely used example to illustrate the concept of social profitability is the railway system : a railway line is economically profitable if it allows the company that manages it to obtain income greater than the expenses necessary to maintain it, that is, if the sale of banknotes serve to compensate and the investment and give you profits; On the other hand, it is socially profitable if society can save an amount greater than those expenses.
In this example, citizens who use the train line perceive an economic benefit, since they avoid the financial investment necessary to buy and maintain their own vehicles, but they also save time, since public transportation does not require no type of maintenance.
Profitability and responsibility
Social profitability also appears in the field of private companies , where it is possible to differentiate the following three types of responsibility :
* primary social : refers to the need or obligation to correct the damage that its operation may cause. This is very common in companies whose operations negatively impact the environment;
* secondary social : while the previous one is a mandatory responsibility in many countries, this is optional, and is seen, for example, in charity campaigns for the most disadvantaged, which many companies use as propaganda to gain the admiration of the public ;
* tertiary social : less direct than secondary, tertiary social responsibility is manifested when a company decides to act in favor of social profitability in fields that are not necessarily linked to its main activity, but seeks to improve its environment through various media.