THE ANALYSIS OF THE BOTTOM LINE OF PROFITABILITY AND THE ANALYSIS OF THE RISK OF STOCK COMPANY

  • Милан Лакићевић, PhD Faculty of Economics, Podgorica
Keywords: bottom profitability point, profitability, marginal profit, relevant area of the production, business leverage, financial leverage, and total leverage

Abstract

Analysis of the bottom profitability point aims to define necessary production volume, i.e. sales while the neutral business and financial result of the company is being realized. This analysis is short-term but due to its simplicity and efficiency, it is widely used regardless the size of the company and the type of the industry. Turning cash point enables managers of the companies to make important business decisions connected the production volume, level of consumer prices, choice of the range of products etc.

Analysis of the bottom profitability point is consistent with the risk analysis of the company business. Income statement represents the cardinal financial report based on which subject analyses are worked out, but we should keep in mind that it is necessary to make its modification, i.e. to apply the account system according to variable costs.

Business and financial risk represent uncertainty regarding realizing business profit and net income and they are quantified through business and financial leverage coefficient.

The level of business and financial risk influence decision making on the capital structure, i.e. it influences decision making on the way and forms of financing the company.

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References

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Published
2010-12-31
How to Cite
Лакићевић, М. (2010). THE ANALYSIS OF THE BOTTOM LINE OF PROFITABILITY AND THE ANALYSIS OF THE RISK OF STOCK COMPANY. Acta Economica, 8(13), 9-37. Retrieved from http://ae.ef.unibl.org/index.php/AE/article/view/176
Section
Review article

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