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Businesses can’t be relieved by increasing sales. What’s important is how much profit left.
In fact, the profit may be reduced even if sales increase, such as raw material height, labor cost, discount sales etc.
In this article, we will organize the differences in sales and profits, and the points you really should look at in investment.
What is sales?
Sales is a number representing how much products and services sold.
It is the total amount of money you have entered.
For example, if you sell a product for 1 million yen, sales will be 1 million yen.
| 内容 | Price |
|---|---|
| Products | 100 million yen |
| Sales | 100 million yen |
However, this is not yet profitable.
From here, we will reduce costs such as cost, labor costs, logistics costs and advertising costs.
What is profit?
The profit is the remainder of decreasing the cost from the sales.
For example, if you spend 1 million yen in sales, the profit remains small.
| 内容 | Price |
|---|---|
| Sales | 100 million yen |
| Price | 60 million yen |
| 人件費 | -20 million yen |
| Profit | 20 |
In other words, if you look at the corporate value, it is important to say "how much you left" than "how much you sold?"
Why profit is reduced even if sales increase?
There are four main reasons.
Increased raw material costs
Examples include food, electricity, and food.
For example, even in a beverage company, the profit is reduced when the plastic bottle, sugar and transportation costs rise.
Even if sales increase, the profit is not included if the cost rise is higher.
Price reduction
There is a case to sell cheaper to increase sales.
In this case, even if the sales volume is changed, the profit per one becomes smaller.
| Getting Started | Impact |
|---|---|
| Increased sales volume | Inc ing sales |
| More discounts | Profitability is lower |
In particular, retailers may increase sales and decrease in profit margin at the same time.
More labor costs
人 has increased labor costs due to上げs and labor shortages.
Even if sales increase, the profit will be overwhelmed by increasing costs such as store staff, factory workers, and shipping personnel.
It’s not just a bad job. It may lead to securing human resources and improving service quality, but it is a factor that lowers profit rate in a short time.
More capital investment
Companies invest in future growth.
For example, a new factory, advertisement, system investment, AI introduction, etc.
These are short-term profits. However, it can lead to future profit growth if it leads to increased productivity and increased sales in the medium to long term.
3 things to expect from investors
Operating income
The operating income rate is an indicator to see how efficiently the business has earned.
The calculation formula is:
Operating Income(%) = Operating Income ÷ Sales × 100Businesses with increased operating profits can have strong value, brand power, cost management and competitiveness.
On the other hand, if the sales increase, the operating profit rate decreases, the profit may be less likely due to low sales or increased costs.
Quality of Sales Growth
Why sales grew?
| Good growth | Growing that requires attention |
|---|---|
| Value raised is accepted | Only the quantity is sold at low price |
| High profit products are growing | Depends on temporary needs |
| Expansion of overseas and new businesses | The price rises only by yen and price rise |
Sales growth has high-quality growth and growth that is hard to lead to profit.
When you see your financial results, check not only sales, but also the description of profit, product composition, price reduction, and cost increase.
) (1 share)
The above is profit per share.
While stock prices are short-term, it is easy to focus on profit growth in the middle and long-term.
Companies with売上 growth in sales may have changed their profits to shareholder value.
On the other hand, companies whose does not grow even though sales are growing need to check costs, capital increase, profit margin decline, etc.
Common misunderstandings for beginners
A common misconception is to think of "previous sales = good company".
This is half correct, but not enough.
In fact, there are the following financial results:
- Top of Sales
- However, profit is reduced
- Reduced profit
- Not extended
In particular, there are cases where only sales increase by price rise.
Therefore, it is important to see the profit, profit, and見る, not only by heading of sales.
- The amount of sales
- The profits will last
- Inc ing profits is normal even if sales increase
- Operating income and are important in investment
- Check the reasons for sales growth
In corporate analysis, you can see the essence of how much you earn than how much you sold.