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.