Topic > Difference between Profitability and Accounting Profit

There is no doubt that profitability can be an indicator of market power, but it is important not to base your market power decision on this aspect alone. As explained, profit can also be a sign of efficiency and high profits can be achieved in competitive markets through legitimate actions. Profits are an incentive for businesses to innovate and expand. If profit becomes directly associated with market power, companies may stop investing in innovation that could lead to a reduction in production costs. However, small businesses may no longer be interested in expanding and will try to keep their profits at a certain level that does not make them dominant. In the long term, these aspects are harmful to the consumer. Profits should be seen as an indicator of market power as long as there are multiple factors