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What is profit quality?

Updated: 4/28/2022
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14y ago

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Profit quality: Refers to the likelihood of a source of profit generating returns in the future

  • e.g. the sale of a lower league football team's star player to a big club might bring a short-term boost to profits but the quality of this profit is very low since it is a one-off transaction and revenues are likely to suffer without him
  • Similarly although selling off the training ground for housing might improve profits this year it may lead to a reduction in form and poorer future profits - i.e. poor profit quality
  • On the other hand, an example of good profit quality is where the football team actually rented out the housing and therefore are getting a continuing profit being made through the houses i.e. good profit quality
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