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Profitability Analysis

Profitability Analysis is the main part to invest for facilities. This analysis is also done in our daily life. This analysis is one of the tools of Decision Making .


Profit = Income - Cost
When incomes increase or costs decrease, profit increase. So there are two ways to gain profit.

General Rules of Profitability Analysis

We may fail without these rules in the profitability analysis.

Sank Cost

"Sank Cost" is a cost we cannot recover the loss happend by unexpected results. When we do our best to recover sank cost, we make new loss.

When we have sank cost, we should forget it in planning.

Orders and Workers

The number of orders of products changes frequently and easily. On the other hand, the number of workers cannot change easily.

So there are two condisions, "too many workers" and "shortage of workers". We should consider two conditions to estimate profit.


When we change the view point of costs, we see different types of costs. And we see different types of problems through the index of money. There is Cost Analysis .

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