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Profitability Ratios, UNIT 1 REINFORCEMENT - Coggle Diagram

- - - - REDUCING DIRECT COSTS:
        
        Reduce labor costs by ensuring that the staff becomes more productive.
      - RAISING REVENUE:
        
        Increase prices in less competitive markets or when consumers are less sensitive to price changes.
        
        Adopt more aggressive promotional strategies.
  - - - Solutions
        
        The NPM can be improved by financial and non-financial strategies such as those mentioned for GPM.
        
        Check indirect costs to avoid unnecessary expenses.
        
        Generate high levels of gross profit.
        
        Negotiate with key stakeholders in order to cut costs.
  - - - Reduce the amount of loan capital to ensure our net profits remains unchanged or does not fall.
        Declare and pay additional dividends to shareholders.
        Domino effect: More dividends equals less retained profits, and hence raising ROCE.
- - - - Is the diferrence between the original cost of investment and the future returns from present values
      - Net Present Value = Net Cash Flow x Discount Factor at NA%
        
        Sum up all the present value of all the years