What does measuring profitability assess?

Measuring profitability primarily assesses the income that a business generates after accounting for all costs, including taxes. This is often evaluated using metrics such as net profit margin or net income, which directly reflect the company's ability to generate profit from its revenues after expenses have been deducted.

Profitability is a crucial indicator of financial health, as it shows how efficiently a company is operating and whether it can sustain its operations and generate a return for its owners or shareholders. Understanding profitability helps businesses make informed decisions about pricing, cost management, and investment opportunities.

Revenue growth, while important, does not measure profitability itself but rather the increase in sales over a period. Market share indicates a company's size relative to competitors but fails to reveal how much profit is retained. The debt-to-equity ratio provides insights into a company's financial leverage but does not directly reflect profitability. Thus, focusing on the income after taxes gives a clear view of a company's profitability performance.