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3. Profitability Analysis

Watch a video overview:

 

Overview: This tool helps to evaluate a company’s ability to generate profits. This tool also helps to visualize a company's breakeven point and the margin of safety between current revenue levels and the breakeven point. 

  1. Displayed at the top of the tool is revenue and three key profitability margins: Gross profit, Operating profit and Earnings before Interest and Tax (EBIT). Clicking on these numbers will show additional detail about these key numbers. 
  2. The Breakeven point represents the revenue level at which the business makes neither a profit nor a loss. In other words, the point at which the company will commence to make a profit.
  3. The Breakeven Margin of Safety represents the margin between the actual sales level and the breakeven point. In other words, the amount by which sales can drop before losses begin to be incurred. The higher the margin of safety, the lower the risk of incurring losses.
  4. 'View top 10 expense accounts' will show, in ranked order, how the business is managing its major expenses and costs of sales.

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At the top of the tool you can change the period currently under review. You can also toggle between a monthly, quarterly or annual view of profitability performance.