Strategic Profit Model – An Overview
Income Statement
Sales
Cost of Goods Sold
Gross margins
Expenses
Net profit
Balance Sheet
Assets
Current assets
Accounts receivable
Merchandise inventory
Inventory turnover
Cash and other Current assets
Operating Cycle
Fixed assets
Asset turn over
Liabilities and Owners Equity
The Strategic Profit Model
Return on Assets
Return on Net Worth
Improving Financial Performance
Profit management
Asset management
Debt management
Setting Performance Objectives
Performance Measures
Types of performance measures
In this chapter we understood the elements of a financial strategy. We
examined two important financial documents: the income statement, and the
balance sheet. We saw how they are important for retailers in evaluating
financial performance. Later, we analyzed the strategic profit model and
examined its components. The strategic profit model uses return on net worth
as key performance measure for evaluating financial performance. Through an
example we saw how using the SPM can improve the financial performance of a
retailer. We then discussed the way in which financial objectives are set.
The setting of financial objectives requires a combination of top-down and
bottom-up planning approaches. Finally we took a look at the various
measures used by retailers for measuring performance.
Short Case Studies / Caselets