So, you have subtracted variable and fixed costs, taxes, interest on loans and depreciation from revenue. Now you have net profit. Determining marginal income, gross profit, EBITDA allows for a more in-depth analysis, relying on available information when conducting business processes. Whereas net profit is needed to calculate the profitability of the activity. Divide it by the revenue volume and multiply by 100%.
The net profit margin shows how many net kopecks a business received for each ruble of revenue. It allows you to determine how much money can be spent on developing the enterprise and/or paid to investors as dividends.
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Step 4. Checking the movement of funds
By this point in creating exploring amazon: the essentials the financial model of the organization, you have understood how the calculated indicators affect profit. However, it is still difficult to say how the money moves, since receipts and expenses occur at different times, and clear deadlines are set for fulfilling obligations to suppliers, personnel, and government agencies.
Inexperienced entrepreneurs usually find it difficult to plan payments and receipts in order to always have a sufficient amount in the account for current expenses. A financial model will help determine how the difference between the amount in the table and the real state of affairs is formed.
Now we need to calculate the working capital, that is, add up the stocks and the difference between accounts receivable and accounts payable in the financial model. It is worth explaining these concepts:
Inventory is the value of goods that are stored in a warehouse or for which the supplier has already received money.
Accounts receivable represent the amount you are owed for services/products provided.
Accounts payable are all the debts you owe.
Working capital indicates how much money a company has. If the figure is greater than zero, it means the business is not using some of its own money. Whereas a figure less than zero is a sign that other people's money is being used.
Let's say you have a post-payment principle, i.e. you sell a product and receive money later. Or you pay for contractors' services in advance. As a result, net profit is expressed not in rubles, but in warehouse stocks, which causes a cash gap - for this reason, one day the company will not be able to pay off its staff, taxes, and other debts.
How to achieve multiple growth in traffic and sales from your website?
Alexey Boyarkin
Dmitry Svistunov
Head of SEO and Development
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