economic assignment uol bsce

1. ASAD ALI ASSIGNMENT 1
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2. ASAD ALI ASSIGNMENT 1
Organizational Assessment And Analysis
Management Systems’ Organizational Assessment provides you with our evaluation
of your company’s current strengths and limitations at each level in the Pyramid of
Organizational Development™ and our recommendations for “next” steps in your
company’s developm ent. While each Organizational Assessment is customized to
the specific client’s needs, the process can include the following:
• Review of documents – including current marketing materials, previous
assessments, written strategic plans, job descriptions, performance evaluation
forms/documents, and any other written information that will help our team
understand how key internal systems, processes, and structure are currently
designed and functioning within your company.
• Interviews with selected company personnel to help identify your company’s
current strengths and limitations with respect Markets, Products/Services,
Resources, Operational Systems, Management Systems, and Culture.
• Administration of Management Systems Growing Pains and Organizational
Effectiveness Surveys to all or a sample of your employees.
• Preparation of a report that:
o Summarizes our findings about your company’s current strengths and
opportunities to improve at each level in the Pyramid of Organizational
Development™ – based on the information we collect. Frequently, we organize
the report by Pyramid level and provide both narrative findings (if
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3. ASAD ALI ASSIGNMENT 1
interviews were used) and quantitative survey results. Our findings present both
the data we collected, as well as our analysis of the data – based on our many
years of experience in helping to build sustainably successful organizations.
o Presents Growing Pains and Organizational Effectiveness Survey results (if
these surveys were used). We also frequently provide our analysis of these
results.
o Provides specific, detailed, recommendations for what you might do to build
upon your company’s strengths and address your company’s limitations. In
developing these recommendations, we draw upon our 35 plus years of research
and work in helping build sustainably successful organizations. We frequently
include recommendations for steps that might
be taken in the short-term (next 6 months) as well as those that might take a year or more to
fully implement.
INFRASTRUCTURE
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4. ASAD ALI ASSIGNMENT 1
PROFIT/LOSS
Profit is the revenue remaining after all costs are paid. These costs include labor,
materials, interest on debt, and taxes. Profit is usually used when describing
business activity. But everyone with an income has profit. It's what's left over after
paying the bills.
Profit is the reward to business owners for investing. In small companies, it's
paid directly as income. In corporations, it's often paid in the form of dividends
to shareholders.
When expenses are higher than revenue, that's called a loss. If a company suffers
losses for too long, it goes bankrupt.
Key Takeaways
• Profit is income remaining after settling all expenses.
• Three forms of profit are gross profit, operating profit, and net profit.
• The profit margin shows how well a company uses revenue.
• Profit drives capitalism and free market economies.
• Increasing revenue and cutting costs increase profits.
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5. ASAD ALI ASSIGNMENT 1
Types of Profit
Businesses use three types of profit to examine different areas of their companies.
They are gross profit, operating profit, and net profit.
Gross Profit
Gross profit subtracts total sales from cost of goods sold (COGS).1
Variable costs are only those needed to produce each product, like assembly workers,
materials, and fuel. It doesn't include fixed costs, like plants, equipment, and the human
resources department.2 Companies compare product lines to see which is most profitable.
Operating Profit
Operating profit includes both variable and fixed costs. Since it doesn't include certain
financial costs, it's also commonly called EBITA. That stands for Earnings Before
Interest, Tax, Depreciation, and Amortization.3 It's the most commonly used, especially
for service companies that don't have products.
Net Profit
Net profit includes all costs. It's the most accurate representation of how much
money the business is making.4 On the other hand, it may be misleading. For
example, if the company generates a lot of cash, and it's invested in a rising
stock market, it may look like it's doing well. But it might just have a good
finance department and not be making money on its core products.
Companies analyze all three types of profit by using the profit margin. That's
the profit, whether gross, operating, or net, divided by the revenue.5
IMPORTANT
The profit margin reveals how well the company uses its revenue.
A high ratio means it generates a lot of profit for each revenue dollar. A low ratio means
the company's costs are eating into its profits. Ratios differ according to each industry.
Profit margins allow investors to compare the success of large companies versus small
ones. A large company will have a lot of profit due to its size. But a small company might
have a higher margin, and be a better investment, because it is more efficient.
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6. ASAD ALI ASSIGNMENT 1
Margins also allow investors to compare a company over time. As the company grows, its
profit will grow. But if it's not becomingmore efficient, its margincouldfall.
Profit Formula
Profit is calculated by the following formula:
π =R-C
• Where π (the symbol for pi) = profit
• Revenue = Price (x)
• C = Fixed cost, such as cost for a building +Variable cost, such as the cost
to produce each product (x)
• x = number of units.
For example, the profit for a kid selling lemonade might be:
π = $20.00 - $15.00 = $5.00
• R = $0.10 (Price for each cup) (200 cups) = $20.00
• C = $5.00 (for wood to build lemonade stand) + $.05 (for the cost of sugar
and lemons per cup)(200 cups sold) = $5.00 + $10.00 = $15.00
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7. ASAD ALI ASSIGNMENT 1
Profit Motive
The purpose of most businesses is to increase profit and avoid losses. That is the driving force
behind capitalism and the free market economy. The profit motive drives businesses to come up
with creative new products and services. They then sell them to the most people. Most
important, they must do it all in the most efficient manner possible. Most economists agree that
the profit motive is the most efficient way to allocate economic resources.6 According to them,
greed is good.
Two Foolproof Ways to Increase Profit
There are only two ways to increase profit.
Increase Revenue
Revenue can by increased by raising prices, increasing the number of customers, or expanding
the number of products sold to each customer.
Raising prices will increase revenue if there is enough demand. Customers must want the
product enough to pay higher prices. Increasing the number of customers can be expensive. It
requires more marketing and sales. Expanding the number of products sold to each customer
is less expensive. The trick is to understand your customer well enough to know which related
products they might want.
Cut Costs
Lowering costs is a good method up to a point. It makes a company more efficient and
thus more competitive. Once costs are down, the business can reduce prices to steal
business from its competitors. It can also use this efficiency to improve service and react
more quickly.
The biggest budget line item is usually labor.
Companies that want to quickly increase profits will lay off workers. This is dangerous.
Over time, the company will lose valuable skills and knowledge. If enough companies
do this, it can lead to an economic downturn. There wouldn't enough workers earning
good wages to drive demand. The same thing happens when businesses outsource jobs to
low-cost countries.
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8. ASAD ALI ASSIGNMENT 1
How Profit Drives the Stock Market
Profits are also known as earnings. Public corporations that are listed on the stock
market announce them every three months in quarterly reports. That occurs during earnings
season. They also forecast future earnings.7
Earnings season significantly affects how the stock market does.8
If earnings are higher than
forecast, the company's stock price rises. If earnings are lower than expected, prices will drop.
Earnings seasons are especially important to watch in the transition phases of the business cycle. If
earnings improve better than expected after a trough, then the economy is coming out of the
recession. It's headed into the expansion phase of the business cycle. Poor earnings reports
could signal a recession.
GRAPH CHART
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9. ASAD ALI ASSIGNMENT 1
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