Title: 11 Reasons Why Profit is Essential
Headings: 11 Reasons Why Profit is Essential
11 Reasons Why Profit is Essential
Content: therefore no new loan. Lenders also look at profitability as a way to measure the ability of management to run the company as follows: Businesses that are consistently profitable – Great management. Businesses that are profitable but erratically – OK management. Businesses that lose money – Poor management (run away as fast as possible). Grows market value of business – Profit is typically the biggest component of EBIDTA and businesses can obtain 2x-8x EBIDTA for valuation purposes. Profit is much more valuable than the assets of the company. Measures the effectiveness of management – Profit is one way outsiders measure the effectiveness of the management team. Lenders, investors, and vendors all use profit as a tool to measure how good management is in running their business. Ability to pay down debt – Profitability, if not used to grow assets, can pay down debt.