Project Report on Profitability Analysis

An empirical approach has become very popular during the recent years. The reason for the growing
popularity of the subject is that it primarily concerns with the concept and techniques of the analysis
of profitability which can be advantage only used by managers, creditors, owners.

Analytical and critical assessment of the various aspects of financial principles helps judicious
application of assets and enables to take right decision at right time. A comprehensive idea is gained
to run day to day business in proper perspective.

The significance of production/operation, marketing, finance and personnel management is being

increasingly realized in modern-corporate world both in India and abroad.

This realization has come into light because of increasing complexities of the task of managers and
administrators. These branches of management help the managers to reach the objectives of an
organization.

A study of these management activities enables the people, engaged in either small size unit or a
large core industry, to understand their objectives and the way how to achieve them successfully.

Profit & Profitability

1. Concepts of Profit :

Profit plays an important role in every business organization and its determination is really a tough
one. Profit is not only concern with the proprietors but also income-tax authorities, managers,
directors etc. because all of them are get a percentage of net profit. Even the accountants are not
unanimous on this matter.

Now question arises, "What is Profit?"

Law and even the accountants have not defined the word "Profit". Generally speaking "The Profit of
Business during a given period is the excess of income over expenditure for the period." It may arise
from other sources.
Maximization of profit has ever been one of the important goals of every business enterprises. The
existence, continuance and expansion of business depends, to large extent, on its capacity to earn a
good amount of profit every year.

The efficiency of a business is measured by the amount of profit earned. A company should earn
profits to serving and grow over a long, period of time. The adequacy of profits says Korn and Boyd.
"Underlies the entire financial structure of a firm. Only if a company to earn profit will it survive in the
long run.

Profits are essential, but it would be wrong to assume that every action initiated by the management
of the company should be aimed at maximization of profits, irrespective of social consequences. "It
is unfortunate that the word profit is looked upon as a term of abuse since some firms always act to
maximize profits at the cost of employee's customers and society."

There are three concepts of profit :

1. Economic Profit

2. Accounting Profit

3. Social Profit