Profitability and Financial Health of a Company

Submitted to – Prof. Siddhartha Bose Submitted to – Prof. Siddhartha Bose

Profitability of a company

Primary goal of all business venture.

Measured with income and expenses.

Computes revenue for any particular period of

time.

Factors affecting profitability

Sales

Pricing

Expenses

Cost of staying in business

Methods

Profitability RatiosProfitability Ratios

Break even analysis for saleBreak even analysis for sale

Return on assets and return on investmentReturn on assets and return on investment

What is Company’s Financial health?

Measured by company’s assets and liabilities.

Reported in company’s balance sheet.

Most important asset is cash and short term deposits.

FACTORS AFFECTING FINANCIAL HEALTH OF A COMPANY

SalesSales

Current assetsCurrent assets

Liquid assetsLiquid assets

Cash flow cycleCash flow cycle

How to assess your company’s financial health?

Parameters:-

Balance sheet

Income statement

Cash flow statement

Conclusion

Whether you are recording profitability for the past period or projecting profitability for the coming period, measuring profitability is the most important measure of the success of the business. A business that is not profitable cannot survive. Conversely, a business that is highly profitable has the ability to reward its owners with a large return on their investment.

Thus it is derived, Profitability maintains the financial health of a Company

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