BUS 210 Week1 DQ - 7460

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What are the similarities and differences between profit and profitability? What makes some companies more profitable than others? Explain your conclusions.

Profit is the same as earnings, net income. We calculate profit by taking Sales (Revenue) and subtracting Expenses. When we say profitability we do not refer to a company's ability to earn future profits. That is earning potential or growth potential. Profitability is a relative term which requires analyzing profitability ratios such as Profit Margin, Operating Profit Margin, Gross Profit Margin, Return on Equity, Return on Invested Capital, and others.


A company is profitable if it turns a profit (rather than generating a loss). However, one company may be more profitable than another if they outperform based on the above mentioned ratios. When people talk about analyzing profitability, they are talking about the ratio analysis.

There are some factors that are more profitable than others and this is because of a better product or service, better market research, they have a more effective advertising campaign, higher productivity and/or lower production costs, faster response to changing market conditions and even better management.

 

 

 

Your friend has asked you why the price of bananas is higher during certain times of the year. Using what you have learned about the laws of supply and demand, explain to your friend how the market affects price.

 

As we all learned demand means the actual demand curve. Or in other words what we as consumers need or buy (this is what we demand). The quantity demanded refers to movement along the demand curve. What this means is that when price changes in a market, there is a change in quantity demanded.

One thing we must have in consideration is the capability of the merchants to supply our needs of bananas with the current demand. With fruits and vegetables it can be unpredictable because of weather changes, the way these mature, if they get bad, if the growers have the goods to supply the stores and much more. It is not a matter of just going to the store to get the product. It is a line of action and reaction.

If the demand is high but the supply is low then the product becomes higher. If the demand is low but the supply is high then the price gets lowered. A good example of this can be the last winter storm when all the strawberry crops in Florida got damaged. We had to increase our prices because it was almost impossible for us to find the product and supply but the restaurants wanted the product to do shakes, and because Valentine’s day was around the corner.

Solution Description

What are the similarities and differences between profit and profitability? What makes some companies more profitable than others? Explain your conclusions.

Profit is the same as earnings, net income. We calculate profit by taking Sales (Revenue) and subtracting Expenses. When we say profitability we do not refer to a company's ability to earn future profits. That is earning potential or growth potential. Profitability is a relative term which requires analyzing profitability ratios such as Profit Margin, Operating Profit Margin, Gross Profit Margin, Return on Equity, Return on Invested Ca