Can Profitability and Morality Co-Exist?

The profitability ration in a financial analysis is the ability of the organization to generate a profit. This ratio looks at areas such as net income, revenue, gross profit, earnings before taxes and interest and operating profit to name a few. Profitability shows the bottom line numbers for a company and is the goal that most organizations strive for. Ratios examined were gross profit margin and net profit margins

Profit is a surplus in money after taking into account all costs incurred in buying and selling a product. Operating profit is the profit made after all direct and indirect costs have been paid. (Bized, 2010a) From NEXT’s company accounts, the operating profit has increased by £51.5m. This is a positive steady increase which has been achieved throughout the

Profit is the money that a business earns in revenue, minus investments, and the cost of salaries.

The difference between economic profit and business profit is that in economic profit, profit or loss is calculated by subtracting opportunity cost of the inputs from the revenue of sales. Business profit is the difference between the total revenue and total costs incurred to earn that

According to Merriam-Webster, ethics is defined as an area of study that deals with ideas about what is good and bad behavior. Some would argue that definition is rather vague. A more complete understanding of ethics would suggest that it is more than just an area of study but rather a way of life; moral principles that govern a person's or group's behavior. If one is ethical and has good moral standards, it is usually seen in that person. Simply put, ethics could be considered the standards of behavior as to which society accepts.

Throughout this task I will do my best to explain how firms determined to maximize profit do just that. Specifically I will delineate how such firms choose the optimum level of production or output for the goods they produce and how they behave with respect to various elevations of marginal revenue. In my attempt it will be appropriate for me to clarify the definitions of various economic terms in order to assure a proper understanding of my thoughts on this topic, I will provide these definitions throughout.

In business there are certain factors that have to be evaluated before a company can see if a profit has been made. To even get to the point where a profit will be made there has to be a product that is sold whether it is a tangible or an intangible product. There has to be something that the business is selling in order to make that profit. The amount of profit that is attained is the outcome of the total revenue minus the total cost. This will then show the business what the remaining profit is. Business is like a puzzle, all the pieces have to fit and work together to have the puzzle complete. In business things have to work together or it won’t work and all the hard work that was put in to making

Such profits are necessary to provide additional compensation to shareholders/owners while constituting capital for future growth, repayment of debt, etc. By the way, it’s a good idea to create a personal budget, so the management team will know how much they need each month from the business in terms of salary and draws, distributions or dividends.

Profit serves a very crucial function in a free-enterprise economy, such as our own. High profits are the signal that consumers want more of the output of the industry. High profits provide the incentive for firms to expand output and for more firms to enter the industry in the long run. For a firm of above average efficiency, profits represent the reward for greater efficiency.

Profitability ratios provide insight into how much profit a company generates with the money that shareholders have invested in the company. Profit margin, return on equity, and earnings per share are all forms of profitability ratios (Stocks Simplified, 2011).

A review of a company’s profitability lets investors or managers know how efficiently a company is operating. There are three key ratios to review. The profit margin, return on equity and return on assets. The profit margin is the net income divided by sales. The higher the profit margins the better. The return on equity is net income divided by total equity (Cornett, Adair & Nofsinger, 2009).. This can help to determine the amount of financial leverage the company is using. The return on assets is the net income divided by total assets. This can also help determine the financial leverage the company is using in regards to its assets (Cornett, Adair & Nofsinger,

created as an accounting concept and accountants decide what it is. Profit doesn’t exist in

Profitability - A positive effect of companies generating operational profits is the ability for companies to expand and grow their operations. Companies often reinvest a certain amount of profits earned from current operations into new business opportunities or expanding current operations to increase business output.

Ethics are the “standards of conduct that indicate how one should behave based on moral duties and virtues.”

Profitability ratios refer to the relative measure to what an actual created profit. Through these ratios the company is allowed to see how profitable the company. In addition it can serve as an examination of the overall performance of the company’s operations and how do these compare to past performances or other companies. The ratios in which accounting measures the profitability of a company are Profit Margin, Price over Earnings, Return on Equity and Return on