Then work out the real sales growth by subtracting the rate of inflation from the original sales growth figure. This REAL figure is a much better representation of how much the company has grown. Though growth in sales revenue usually means that profit has grown, it is not inevitable. Let s go back to the 5 companies you chose above and see if their sales growth has led to more profit. Put the sales revenue growth figure that you worked out in step 2 in the last column, and compare this with the profit growth.
Companies have to be careful to keep costs under control.
Any excessive increase in costs will obviously damage their profitability. The Extel data doesn t give us the figure for the company s overheads, but we can work it out by deduction. To check your understanding of the different types of costs, try to classify the costs in the table below as either direct or indirect and put a tick in the appropriate column. Permission is granted for use for academic purposes only. Redistribution is forbidden.