This situation occurs when the organization's activity in the market decreases. Revenue decreases faster than costs, under the influence of production leverage. It is necessary to analyze the company's marketing policy.
Revenues are falling and expenses are rising. This is due to the following reasons:
reduction in cost;
increase in spending standards;
change in the sales assortment structure.
It is necessary to analyze pricing and product range policy and evaluate the cost control system.
Provided the market is stable, revenue changes faster than expenses only under the influence of production leverage. In all other cases, this is due to an incorrectly structured accounting and control system in the organization or to a change in operating conditions (inflation, cost structure, demand, level of competition).
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Sales Profitability Analysis
The profitability ratio itself only tells about the profit or loss of the organization, but does not shed light on business processes. In general, an increase in the profitability of a company is associated with an improvement in the efficiency of its activities.
But for a full analysis, it is important to honduras phone data track the dynamics of all indicators. At the same time, depending on the purpose of the analysis, specialists use gross or net profit, as well as profit from sales.
Regardless of the method of analysis and the specifics of the indicator, there are no uniform standards for the industry - you need to know how to calculate sales profitability using a formula and evaluate the coefficients relative to these indicators for past periods in your specific organization.
Sales Profitability Analysis
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However, if you have just recently opened a business, it is permissible to use not actual data, but open statistical indicators of competitors or apply a mathematical model to form a business plan.
So, you know how to determine the profitability of sales using the formula, and you have calculated it. Next, you need to analyze the result and compare it with the standard values. This way, you will be able to correctly evaluate the company's performance and its e