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Tuesday, 12 November 2019

Positive and Negative Profit

Positive and Negative Profit


In many cases, companies that make good revenues might not be sufficient enough to make the company runs at profit. People say, my company is making a profit, but the question is, is it a positive profit or negative profit? A positive profit is a profit which is on the uptrend an at a situation the company operation is living on the profit. 

On the other hand, negative profit is where the company is having a decline trend profit and the company is surviving at sometimes later they will survive on capital or retain profit or profit carried forward from last year or previous years. This is not a good operative and finance situation. The company might drain its financial capabilities and end up in financial tight.

The question arises where what shall we do? To ensure the company smooth operation and able to gain good sustainability situation, we need to focus on 

a. Sale

b. Variable Cost

c. Fixed Cost

It's much easier to express but the task on (b) and (c) is much more difficult in comparison to A. Why? 

A might involve 3 departments; sale, production or procurement for a trading company and logistic (for delivery). In ensuring the variable cost and fixed cost could be attained at to its lowest cost, it involves all departments. A business process or value chain analysis needs to be done to every department identifying the key cost drivers of the company. Only after a proper business process or value chain analysis done, one could not determine the efficiency of the company.

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