Profitability refers to a company's ability to generate more money than it spends. When a business earns a profit, it means that its revenues exceed its costs, allowing it to grow, invest, and reward its owners. For example, a small bakery that sells delicious pastries can be profitable if its sales cover the costs of ingredients, rent, and wages. Understanding profitability is crucial for any business owner. It helps them make informed decisions about pricing, expenses, and investments. By analyzing profitability, a business owner can identify which products are most successful and where to cut costs, ultimately leading to a healthier financial future.