How important is it for a company to calculate the rate of profit growth?
Posted: Thu Dec 12, 2024 7:50 am
The basis of a commercial enterprise's activity is to make a profit. And the main thing here is the rate of profit growth (the indicator is called revenue growth rate).
Based on this indicator, the success of business development is judged. At the same time, the main task of any company is not to increase sales, but to earn more.
Why is it important to know the company's profit growth rate?
Source: shutterstock.com
There is a joke about this. A small store opened in one city. On the first day of its work there were already a lot of people there. On the second day, there were queues. On the third day, half of the viber database city residents really wanted to get in. The owners of neighboring stores became interested in what was being sold there and what was so attractive to customers. Competitors approached the store and saw a sign: "We sell a ruble for 99 kopecks." They were surprised. They asked the owner: "Is your business really that profitable?" To which they heard: "We haven't calculated the profit yet, but the turnover is simply incredible."
Income (sales revenue) is the money that a company receives from doing business – usually from selling goods and/or services.
In accounting terms, revenue is the "top line" of the income statement. The "bottom line" is net income (the amount left over from revenue after all expenses have been deducted).
Revenue is generally thought of as income that a company receives in the form of cash or cash equivalent. But sales revenue can also be income that a business receives from selling products or services over a specified period of time.
Although the rate of profit growth is a fairly simple indicator, its importance should not be underestimated. Organization managers are required to monitor the value of this key indicator, since it is on its basis that one can evaluate how successfully the company's strategic and operational goals are being realized.
Moreover, profit growth rate charts are always interesting for investors. If a company shows confident profit growth rates, experts consider this a positive trend, even with a rather slow profit growth.
Read also!
"Company Profit: Definition, Types and Calculation Examples"
Read more
Experts (as well as company management and even competitors) compare profit growth in the current period with the previous period (usually quarterly). Current sales charts are also usually compared on an annual basis. Thanks to such analysis, it is possible to evaluate the increase in sales over time and, accordingly, draw conclusions about the company's efficiency, especially with an eye on competitors.
Revenue from sales of goods and services is reported in the company's general ledger and, from time to time, in the "Revenue" section of the income statement. It describes the types of income, such as "Revenue from repair services," "Revenue from cleaning activities."
Based on this indicator, the success of business development is judged. At the same time, the main task of any company is not to increase sales, but to earn more.
Why is it important to know the company's profit growth rate?
Source: shutterstock.com
There is a joke about this. A small store opened in one city. On the first day of its work there were already a lot of people there. On the second day, there were queues. On the third day, half of the viber database city residents really wanted to get in. The owners of neighboring stores became interested in what was being sold there and what was so attractive to customers. Competitors approached the store and saw a sign: "We sell a ruble for 99 kopecks." They were surprised. They asked the owner: "Is your business really that profitable?" To which they heard: "We haven't calculated the profit yet, but the turnover is simply incredible."
Income (sales revenue) is the money that a company receives from doing business – usually from selling goods and/or services.
In accounting terms, revenue is the "top line" of the income statement. The "bottom line" is net income (the amount left over from revenue after all expenses have been deducted).
Revenue is generally thought of as income that a company receives in the form of cash or cash equivalent. But sales revenue can also be income that a business receives from selling products or services over a specified period of time.
Although the rate of profit growth is a fairly simple indicator, its importance should not be underestimated. Organization managers are required to monitor the value of this key indicator, since it is on its basis that one can evaluate how successfully the company's strategic and operational goals are being realized.
Moreover, profit growth rate charts are always interesting for investors. If a company shows confident profit growth rates, experts consider this a positive trend, even with a rather slow profit growth.
Read also!
"Company Profit: Definition, Types and Calculation Examples"
Read more
Experts (as well as company management and even competitors) compare profit growth in the current period with the previous period (usually quarterly). Current sales charts are also usually compared on an annual basis. Thanks to such analysis, it is possible to evaluate the increase in sales over time and, accordingly, draw conclusions about the company's efficiency, especially with an eye on competitors.
Revenue from sales of goods and services is reported in the company's general ledger and, from time to time, in the "Revenue" section of the income statement. It describes the types of income, such as "Revenue from repair services," "Revenue from cleaning activities."