Measuring profitability goes beyond just looking at the bottom line. Entrepreneurs should consider several financial metrics:
1. Gross Profit Margin: This measures the difference between revenue and the cost of goods sold (COGS). It indicates how efficiently a business is producing its goods. 2. Net Profit Margin: This is the percentage of revenue remaining after all expenses, taxes, and interest have been deducted. It provides a comprehensive view of overall profitability. 3. Return on Investment (ROI): This measures the gain or loss generated on an investment relative to its cost. It helps in assessing the efficiency of investments. 4. Break-Even Analysis: This determines the point at which total revenue equals total costs, indicating no net loss or gain.