Profitability analysis seeks to understand a company’s ability to generate profit. When companies report on sales and profitability data, analysts can then drill into that data by analyzing drivers like customer, country, product, number of units, price etc., in order to identify which drivers are yielding profits and which drivers are leaking them.

Common drivers are:

  • business segment
  • product/service type
  • sales channel
  • geographical area
  • customer type 
  • individual customer
  • stage in the production process

Each driver is analyzed to determine segments that are most profitable and identify those which aren’t. For example: the most profitable customers vs. the least profitable customers. Thorough profitability analysis can provoke positive change within organizations, leading to action based on key insights, like fast responses to changing customer needs. It functions to maximize the effectiveness of the product mix and remedy areas of decreasing profit margins.

Discover how CCH Tagetik Performance Management Software delivers:
Profitability Planning
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