The concept and importance of profitability5.5.2 Liquidity: • The concept and importance of liquidit

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1. Profitability:

   • Concept: Profitability is a financial metric that is widely used to measure the probability of gaining a profit or earning income. It is also used to identify a company's weaknesses and improve its performance.
   • Importance: Profitability is important because it can provide insights into a company's financial health, its ability to fund its operations, and its ability to provide a return on investment to its shareholders. It's a key indicator of the success and sustainability of a business.

2. Liquidity:

   • Concept: Liquidity refers to the ability of a company to meet its short-term obligations as they come due. It's about how quickly and easily assets can be converted into cash.
   • Importance: Liquidity is important because it determines a company's ability to pay off its debts as they come due, to meet unexpected needs for cash, and to take advantage of opportunities that arise. A company with good liquidity can easily fund its ongoing operations, which contributes to its overall stability and growth.

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