Profitability analysis is part of enterprise resource planning (ERP) and helps business leaders to identify ways to optimize profitability as it relates to various projects, plans, or products. It is the process of systematically analyzing profits derived from the various revenue streams of the business.
Who is responsible for profitability?
Certainly, a CEO or general manager is responsible for profitability, but most of these individuals are focused on major strategic initiatives, important customer relationships, and making sure their key managers make budget.
How do you do a profitability analysis of a company?
You have several factors to consider when analyzing profitability and net income so that the numbers paint a clear picture.
- Calculate the net income of a company. ...
- Figure the total sales of the company. ...
- Divide net income by net sales and multiply by 100. ...
- Analyze a low profitability figure by looking at the costs.
