Is my company profitable?
Profitability is one of the most important Performance Measurements a company can monitor. Unfortunately, many companies have a myopic view and measure only one aspect of profitability.
A company's profitability is the net result of a myriad of business decisions involving various departments. The sales department determines the selling price, the purchasing department determines the cost to produce, operations determines the labor and cost to operate the facility and management determines the overhead cost. Combined --all these people (and their decisions) affect the profitability of the company.
The two most common mistakes are:
(1) focusing primarily on the profitability of a project, product or service and ignoring the cost to operate or
(2) focusing solely on the bottom line and not understanding the effect each stage of the business cycle has on profitability.
It is best to measure profitability at different intervals throughout the business cycle, at the tactical level (per project, product or service) and on a company-wide level through net income and retained earnings.
To read more on this topic visit www.BusinessSimplyPut.com ebooks (new summary will be available April 1, 2011)
A company's profitability is the net result of a myriad of business decisions involving various departments. The sales department determines the selling price, the purchasing department determines the cost to produce, operations determines the labor and cost to operate the facility and management determines the overhead cost. Combined --all these people (and their decisions) affect the profitability of the company.
The two most common mistakes are:
(1) focusing primarily on the profitability of a project, product or service and ignoring the cost to operate or
(2) focusing solely on the bottom line and not understanding the effect each stage of the business cycle has on profitability.
It is best to measure profitability at different intervals throughout the business cycle, at the tactical level (per project, product or service) and on a company-wide level through net income and retained earnings.
To read more on this topic visit www.BusinessSimplyPut.com ebooks (new summary will be available April 1, 2011)
Posted by LW and Associates at 3/24/2011 12:11 PM 
Categories: Finance
Tags: profit small companies finance performance measurements business simply put lori williams
Categories: Finance
Tags: profit small companies finance performance measurements business simply put lori williams
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