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Analysis of the profitability - A strategic approach

Author

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  • Eduard Dinu

    () (Academy of Economic Studies, Bucharest)

Abstract

The analysis of the profitability is a central point of the economic and financial system indicators at the microeconomic level. All the entities the firm has business with are directly interested in the positive result of its activity. We present a logical approach of the main possibilities for maximizing the profit at the level of the sold quantity, of the selling price and of the unit price. Thus, at the level of quantity, the main concern of the firm management should be to get the highest degree of utilization for the production capacity they have at disposal, so that the cost of an under-utilization should be avoid. Concerning the selling price, it is very important the estimate of the demand elasticity when the price is changed and concerning the cost, specific actions should be taken for improving all the specific resource consumption-material, human and financial ones. The approach of the three indicators together could create the mechanism for optimizing their evolution and for creating the business profitability.

Suggested Citation

  • Eduard Dinu, 2004. "Analysis of the profitability - A strategic approach," The AMFITEATRU ECONOMIC journal, Academy of Economic Studies - Bucharest, Romania, vol. 6(16), pages 45-48, September.
  • Handle: RePEc:aes:amfeco:v:6:y:2004:i:16:p:45-48
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    More about this item

    Keywords

    Economics of scale; Demand elasticity; Production capacity;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • M11 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Production Management

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