Profit Generation

Follow this video to understand and utilize the Profit Generation widget on the main page of CFO Scoreboard:

The Profit Generation section shows how successfully your assets and revenue are generating profits.

The first thing we look at is how good your business is at utilizing the assets on your balance sheet to generate profits. For example, if you are a manufacturing company, you probably had to invest in some manufacturing equipment and other assets. CFO Scoreboard shows you how much Profit the business generated for each "dollar" of assets you have on your balance sheet. You get a thumb's up if this ratio is higher this month than last month.

Some businesses, such as service businesses, don't require a lot of physical assets. For these types of companies, their employees are their biggest assets.  We look at it two ways – how many dollars of profits each employee generated, and for each “dollar” of payroll, how many “dollars” of profit did you generate?

 Another important metric CFO Scoreboard measures at is how efficiently you turned your revenue into profits. This is your profit margin, and a company with low expenses will have a higher profit margin than a similar company with higher expenses. Controlling and managing expenses is a critical driver to higher profitability and improving profit margins.

Of course, viewing these ratios in isolation is not that useful. What's important is whether or not your business is improving over time. To see the trends, click the metric you are interested in, and CFO Scoreboard will show you a graph of how that particular metric has performed over the past year or so.

At the top of this section there is a menu that lets you choose how these metrics are displayed. By default, we show you the metrics as ratios, or what we call “MBA Language”, because this is the way that these metrics are commonly taught at university business schools. However, you can also view these ratios in “Plain English”, which might be a bit easier to understand. 

The Profit Conversion Metrics section shows how successfully your assets and revenue are generating profits.

The first thing we look at is how good your business is at utilizing the assets on your balance sheet to generate profits. For example, if you are a manufacturing company, you probably had to invest in some manufacturing equipment and other assets. The Assets to Profits comparison shows for each dollar of assets on your balance sheet, how many dollars of profits the business generated. You get a thumb's up if this ratio is higher this month than last month.

Some businesses, such as service businesses, don't require a lot of physical assets. For these types of companies, their employees are their biggest assets.  We look at it two ways – how many dollars of profits each employee generated, and for each “dollar” of payroll, how many “dollars” of profit did you generate?

 Another important metric CFO Scoreboard measures at is how efficiently you turned your revenue into profits. This is your profit margin, and a company with low expenses will have a higher profit margin than a similar company with higher expenses. Controlling and managing expenses is a critical driver to higher profitability and improving profit margins.

Of course, viewing these ratios in isolation is not that useful. What's important is whether or not your business is improving over time. To see the trends, click the metric you are interested in, and CFO Scoreboard will show you a graph of how that particular metric has performed over the past year or so.

At the top of this section, you will find a menu that lets you choose how these metrics are displayed. By default, we show you the information in plain English, but you can view the same metrics as ratios if you prefer. These ratios are commonly taught in business schools around the world, and if you prefer to see the metrics this way, you can change the setting to "MBA Language".