Advantages of an income statement

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udoy
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Joined: Sun Dec 22, 2024 3:31 am

Advantages of an income statement

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With the results, you will be able to develop the right financial and growth strategy for your company: it will be easier for you to determine the right directions to take in order to make more profits. Profitability analysis It will also allow you to answer questions about the profitability of your investments and identify the possible loan repayment periods. Above all, it will allow you to estimate the value of your business.

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What is the purpose of a feasibility analysis?

Profitability analysis is used in the daily management of any company. Many managers ask themselves the question "When will sales start to make a profit?". In order to answer this question, it is necessary to use, among other things, a break-even analysis . Only when a certain sales volume is exceeded does the unit become profitable and the company's operation is viable.

The break-even point is used to decide on profit optimization and determine the prices of manufactured products, calculate the production volume that ensures obtaining the planned profit, and determine the impact of changes in production volumes, prices and costs on the level of the company's financial result. It is also used to assess the profitability of investment projects.

The profit and loss account is important for any company. When making financial decisions, the instrument of break-even analysis can be used, i.e. the study of its sensitivity to a variation in factors such as the price of the product, fixed and variable costs, sales volume or expected profit. It is a useful tool for planning a company's activities in terms of production, sales and price calculations in subsequent periods of activity.
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