Chapter 12

Analyzing Profit


Facing up to the profit-making function of business managers

Scoping the field of managerial accounting

Centering on profit centers

Making internal P&L reports useful

Analyzing profit for fun and more profit

As a manager, you get paid to make profit happen. That’s one thing that separates you from the employees at your business. Of course, you should be a motivator, innovator, consensus builder, lobbyist, and maybe sometimes a babysitter, but the hardcore purpose of your job is to make and improve profit. No matter how much your staff loves you (or do they love those doughnuts you bring in every Monday?), if you don’t meet your profit goals, you’re facing the unemployment line.

Competition in most industries is fierce, and you can never take profit performance for granted. Changes take place all the time — changes initiated by the business and changes from outside forces. Maybe a new superstore down the street is causing your profit to fall off, and you figure that you’ll have a huge sale to draw customers, complete with splashy ads on TV and Dimbo the Clown in the store. Whoa, not so fast! First make sure that you can afford to cut prices and spend money on advertising and still turn a profit. Maybe price cuts and Dimbo’s balloon creations would keep your cash register singing, but making sales does not guarantee that you make a profit. Profit is a two-sided challenge: Profit comes from making sales and controlling expenses.

This chapter ...

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