For example, to your bank manager or investors.
The reason why the father wished to close down the branch was that it appeared to be making a loss. However, it is quite the reverse; if the branch was closed then, the positive contribution from the branch would be lost and overall profits would fall.
This is because the indirect costs of production do not vary with output and, therefore, closure of a section of the firm would not lead to immediate savings. This may mean that closing the branch would be a mistake on financial grounds. This mistake is made due to a misunderstanding of nature of cost behavior.
If the branch is closed then the only costs that would be saved are the costs directly related to the running of the branch: The costs are indirect in nature, in this example the marketing and central administration costs, would still have to be paid as they are unaffected by output.
For this decision to be made, we should use contribution as a guide for deciding whether or not to close a branch. This can also be applied to the production of certain product lines, or the cost effectiveness of departments.
On financial grounds, contribution is therefore, a better guide in making decisions.Free business planning and marketing tips, samples, examples and tools - how to write a business plan, techniques for writing a marketing strategy, strategic business plans and sales plans.
This article is part of our “ Business Planning Guide “ —a curated list of our articles that will help you with the planning process! What is a business plan?
In its simplest form, a business plan is a guide—a roadmap for your business that outlines goals and details how you plan to achieve those goals.
How to Write a Business Plan really got me thinking about many things I didn't realize was important when starting a business.
The author uses an easy to follow writing style and gives real life stories to help you understand what he is trying to convey. This article is part of both our Business Startup Guide and our Business Planning Guide —curated lists of our articles that will get you up and running in no time!.
If you’ve reviewed what a business plan is, and why you need one to start and grow your business, then it’s time to dig into the process of actually writing a business plan.. In . Introduction.
Profit planning, increasing your business profit, is simply the development of your operating plan for the coming alphabetnyc.com plan is summarized in the form of an income statement that serves as your sales and profit objective and your budget for cost.
The profit and loss statement (also called an income statement) is a summary of income and expenses for your business over a period of time. It's prepared at regular intervals – usually monthly and at the end of the financial year.
Use the financial statement template below to create a profit and.