Which measure is considered the best indicator of sustainable profitability?

Income from Continuing Operations is regarded as the best indicator of sustainable profitability because it represents the earnings derived from the core business activities that a company expects to maintain over the long term. This measure excludes the effects of extraordinary items, discontinued operations, and other one-time transactions that can distort true operational performance. By focusing on ongoing business activities, Income from Continuing Operations provides a clearer view of how well the company is generating profit from its primary operations, making it a more reliable indicator for assessing sustainable profitability.

In contrast, net income can be influenced by a variety of non-operating factors, including taxes and one-time gains or losses, which may not reflect ongoing business efficiency. Operating profit also provides insight into core business performance but can still be affected by occasional irregularities. Gross profit, while useful for understanding how well a company manages its production costs relative to sales revenue, does not account for other critical operating expenses, therefore providing an incomplete picture of overall profitability sustainability.