Question

How does a company measure profit growth?

a.by finding the percentage increase in net profits over time.
b. by adding the profitability of the last two fiscal years.
c. by subtracting the previous year's gross profit from the current year's gross profit.
d. by calculating the difference between the previous year's profitability and the current year's profitability.
e. by dividing the net profits of the firm by total invested capital.

Answer 1

a. by finding the percentage increase in net profits over time

Step-by-step explanation:

The primary reason why companies engage in business is to make profit. When profits are made, that means there will be opportunity for expansion. A company that does not make profit will not expand hence the possibility of its survival will not exist.

Companies make profit to finance business operation, purchase critical assets etc. Companies measure their profit growth to know how well their profit increase overtime and it is measured by finding the percentage increase in net profits overtime.