This book review was written by Eugene Kernes
“Profit is a deeply moral concept, since without profit we will suffer, not from exploitation, but from a misallocation of resources, a failure to provide the goods and services that the economy needs, the nation’s loss of tax revenue, a reduction in employment and the inability to provide for social change.” – Hetal Shah, Chapter: Introduction
“You can decrease the cost of revenue by decreasing the fixed costs such as rent, utilities, equipment, and by decreasing variable costs like raw materials, delivery, commission and payroll. Please note that decreasing fixed costs may compromise the reputation of the company, and decreasing variable costs may compromise the integrity and quality of the products/services sold.” – Hetal Shah, Chapter: The Income Statement
“If you find a positive number when looking at ROI, you know the company has a sound return, and that it uses borrowing to expand, rather than using debt to survive. Make sure that the ROI excludes income from capital improvements made with debt.” – Hetal Shah, Chapter: Profitability Ratios
Excerpts with permission from the Author.
Is This An Overview?
Profit enables the appropriate allocation of resources. Profit is a social motivator of change. There are many ways that profit outcomes can be adjusted. Various profit metrics that a business can use to improve their financial status are found in this reference book. Profit itself is a term for the remaining revenue when costs are taken into account.
Profit can be
improved through increased revenue, or reduced costs. Changes that appear simple, but are complex in
practice. Reducing costs can hinder
product quality, which effects the reputation of the business. The business itself might have a quality
product, but has competitors that are more efficient. This book is a short guide on what to look
for when considering changes that effect the business.
As a reference book, there is not
much analysis on the metrics. As each
business is different, each business may need to use different methods and
focus on different metrics to improve their business.