ABSTRACT

Probably no term is used more often among managers than the word profi t, or “the bottom line.” For any business, the bottom line on the income statement is crucial. This fi gure represents a composite of how the fi rm, and its management, has performed over the past year. It is a guideline to measure the relative success or failure of the fi rm over this period of time. Profi t , the amount remaining from a sale after cost of the product and operating expenses have been paid, is often used as a historical benchmark to provide evidence of the skill and ability demonstrated by decision-makers within the organization. The fi rm’s CEO (chief executive offi cer), corporate board members, and management team are all enamored with this word “profi t.” The importance of this fi gure over time can be related to the ability of the fi rm to grow, enter new markets, and introduce new products.