Workflow Templates: Profitability Analysis Checklist

Review the trend of gross revenue over the past periods to identify growth patterns or declines.

Analyze revenue streams by product, service, or division to determine which areas are the most profitable.

Compare actual revenue to budgeted or forecasted revenue to evaluate the accuracy of financial projections.

Examine the cost of goods sold (COGS) and assess the gross margin to identify areas for cost reduction.

Evaluate operating expenses, categorizing them into fixed and variable costs to better understand their impact on profitability.

Identify any non-operating expenses or one-time costs that may have affected profitability in an abnormal way.

Calculate and analyze the gross profit margin, operating margin, and net profit margin to understand overall profitability.

Benchmark the company’s profit margins against industry averages to assess competitive standing.

Investigate any significant deviations from the expected margins and identify the underlying causes.

Review the pricing models for products or services to ensure they align with the market and cover costs.

Conduct a breakeven analysis for different pricing scenarios to find the most profitable option.

Evaluate the impact of discounts, promotions, and other pricing tactics on overall profitability.

Assess the return on investment (ROI) for major capital expenditures to determine their impact on the company’s profitability.

Review the terms and conditions of any funding or loans to ensure they are favorable and not excessively diluting equity or profits.

Analyze cash flow statements to ensure sufficient liquidity for operations without hindering profit potential.

Examine labor and production efficiency metrics to identify any areas where productivity can be improved.

Analyze the utilization of assets and resources to ensure they are contributing positively to profitability.

Review overhead costs and identify opportunities for savings through more efficient processes or cost-cutting measures.

Profitability Analysis Checklist