STUDENT CORNER - 244
NET PROFIT
Net profit tells you how much money you really make out of your
business. Your financial decisions must and do depend on the quantity of the
net profit.
Before you make any financial decisions, you must be very sensitive to
marketing dynamics which includes the state of domestic regional and
international marketing status. With media explosion it is not difficult to
assess the market status of all countries like developed and developing
countries. We have International Monetary Fund that very carefully analyses the
national and international market forces through all dimensions, say,
political, financial, commercial trade; it goes to the extent of predicting
growth level of the countries as well.
That is, you will have to be alert to global events that impact trade at all
levels. In short, you must know whether the economies of the countries are
performing well or ill, meaning they are positive or negative; healthy trends
or recession-prone trends. With this background, you can decide whether to
expand the business or to wait for proper moment2In this context comes the
effective use of net profit. You know the money you can well-afford to invest
without real risk to your current business.
Net profit tells the investors and also shareholders of the company its
efficient performance and investment-friendliness. It also encourages and
motivates the management to improve sales volume and market share so that they
can have more of net profit. Net profit is a proven parameter for the
performance of the company. It informs the shareholders as well as stakeholders
the revenue generating capacity of the company. And all the business efforts
of the company are directed towards the
final goal of the business: Improve net profit of the company. The time and
again proven fact to improve net profit of the company is just two things, two
facts: increase sale volume and decrease expenses. How to increase sale volume
and how to decrease the expenses of the company are million dollar question.
Anyhow, we shall try to see some basic facts on these two pillars of the
company in our next session.
