Chapter 7
Cost and Profit—Cash Flow
As we analyze a business process or system for value-added content, the subject of cost turns into an interesting area of discussion. As we prepare our quarterly reports to the board of directors and our stockholders, profitability turns into an even more interesting area of discussion. Let’s examine the relationship between cost and profit for a bit before we proceed to true cost.
There are those who believe profit can be predetermined. You establish your cost, you add whatever margin you desire for profit, and then you establish your selling price. We would comment that it’s usually not quite that easy.
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