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Profitability is simply a measure of how successful a company is relative to its inputs. Measures of profitability include gross profit and net profit ratios, return on assets, return on equity, etc.
Liquidity is a measure of how likely a company is to meet its short-term obligations (e.g., will it be able to settle its liabilities on time). Standard measures of liquidity include current ratio and quick ratio.
Both of these measures are important parts of assessing a company's financial standing. For example, even if a company is profitable, if it is having a hard time meeting it's short-term obligations, then something is wrong with its operations. Likewise, if a company is very liquid because it has large cash reserves lying around, it means that it might not be using its resources efficiently, and should be using some of that cash to invest in company growth.
What else can I help you with?
Is accrual accounting more closely related to a company’s goal of profitability or liquidity?
Profitability
How are the concept of liquidity and profitability different?
The liquidity means the assest which can easily turned in to cash.. where as profitability is money which u have earned from ur business it is also cash...
How do banks achieve a balance between profitability and liquidity?
fully discription of ii
Types of ratios?
1 - Actiivty raios 2 - turnover ratios 3 - Profitability ratios 4 - Liquidity Ratios
Is Working capital is a measure of a company's profitability?
No, working capital is not a direct measure of a company's profitability. Instead, it represents the difference between current assets and current liabilities, indicating a company's short-term financial health and liquidity. While sufficient working capital can support operations and indirectly contribute to profitability, it does not directly assess a company's overall profitability, which is typically measured by metrics like net income or return on equity.
What is relationship between liquidity profitability and solvency?
If liquidity inceases profitability decreases so there is inverse relationship
Is accrual accounting more closely related to a company's goal of profitability or liquidity?
Profitability
Is accrual accounting more closely related to a company’s goal of profitability or liquidity?
Profitability
How are the concept of liquidity and profitability different?
The liquidity means the assest which can easily turned in to cash.. where as profitability is money which u have earned from ur business it is also cash...
What are the four pillars of finance?
Liquidity, Profitability,Stability,Growth
What is the difference between profitability and liquidity?
liquidity is how quickly an item can be converted to cash, usually to pay short term debts, profitability is how much money an entity has after taking sales revenue - cost of goods sold...so gross margin
Why is profitability more important than liquidity?
If your company is profitable, you will have the money to be liquid. Only when the money isn't there does liquidity become a factor.
Is profitability more important than liquidity?
If your company is profitable, you will have the money to be liquid. Only when the money isn't there does liquidity become a factor.
What are four major financial ratios?
Liquidity, Profitability, Leverage, and Activity/Efficiency
How do banks achieve a balance between profitability and liquidity?
fully discription of ii
A short-term creditor would be most interested in?
profitability
The dilemma of liquidity vs profitability arises in case of?
only public sector units
