Cost effectivenessThe dictionary of the Royal Spanish Academy (RAE) defines the cost effectiveness as the profitable condition and the ability to generate income (profit, profit, profit, utility). Profitability, therefore, is associated with obtaining Profits starting from a certain investment.

Typically, profitability refers to the economic gains that are obtained by using certain means. It is usually expressed in percentage terms.

Take the case of a bakery that, to produce each kilogram of bread that it sells to 20 pesos, you need to invest 15 pesos. This figure includes raw materials, spending on electricity and gas, taxes, etc. In this way, the bakery obtains a profitability of 5 pesos for every kilogram of bread you sell.

It is known as economic profitability, in short, to the yield obtained by the investments. In other words: profitability reflects the profit generated by each peso (dollar, euro, yen, etc.) invested. Suppose the ratio Of a company X it is 25%: means that the signature obtains a profit of 25 pesos for every 100 pesos you invest.

Profitability can also be associated with the interest generated by a financial investment. A bank can offer a profitability of 10% to customers who deposit the money in a fixed term. In this way, the person what deposits $ 1,000 within a fixed period of thirty days, you will receive $ 1,100 at the time of expiration. Therefore, you will win 100 dollars because the assured profitability of the investment you made ($ 1,000 in a fixed term) was from 10%.

The social profitability, for its part, is a phenomenon that occurs when the development of an activity offers Benefits to a greater extent than the losses, to the entire society, regardless of whether it is profitable from an economic point of view for the developer. This concept is opposite to that of economic profitability, defined in a previous paragraph, since in that case it only matters if the activity is beneficial for its promoter.

An example widely used to graph the concept of social profitability is the system railway: a railway line is profitable at an economic level if it allows the company that manages it to obtain income greater than the expenses necessary to maintain it, that is, if the sale of tickets serves to compensate and the investment and gives it a profit; on the other hand, it is socially profitable if society can save more than these expenses.

Cost effectivenessIn this example, citizens who make use of the train line perceive an economic benefit, since the economic investment necessary to buy and maintain their own vehicles is avoided, but also save money time, since public transport does not require any maintenance.

Social profitability also appears in the field of private enterprise, where it is possible to differentiate the following three classes of responsibility:

* social primary: refers to the need or obligation to correct the damage that its operation may cause. This is very common in companies whose operation has a negative impact on the environment;

* secondary socialWhile the former is a mandatory responsibility in many countries, this is optional, and is appreciated, for example, in charity campaigns for the most disadvantaged, which many companies use as propaganda to gain the admiration of the public. public;

* tertiary social: less direct than secondary, tertiary social responsibility becomes evident when a company decides to act in favor of social profitability in fields that are not necessarily linked to its main activity, but rather seeks to improve its environment through various means.