One Percent Realtor Austin

One of the most important aspects for maintaining profitability is to control expenses. However not all costs associated with profit are created equal. Certain types of expenses require more scrutiny than others. This article examines what types of costs require closer examination for maintaining profitability as well as the importance of calculating expense to gross profit percentage.

The Financial Statements -Gross Profit and Expenses

The main financial statement that reports gross profit and expenses is the company’s income statement. Gross profit in a sales environment is generally total sales less the cost of goods sold, although other income can be included. Net profit, as reported on the income statement, is gross profit less expenses.

Since there are two main factors that determine net profit, expenses and gross profit from sales, it’s imperative that both factors are analyzed and corrected if a negative trend develops. In most instances it’s much easier and quicker to make changes to costs that effect profits than is to make changes to sales and associated gross profit. Calculating and tracking expense to gross profit percentage is a means for controlling profits.

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