Strategic Profit Model

Sales
Gross -
margin
Net profit Net COGS
Net sales profit -
Net profit ÷ Variable
Margin % expenses
Total
Sales
expenses +
Fixed
expenses
Return on Financial Return on
= x Times
Net worth Leverage Assets %

Net profit
Sales Inventory
Total assets
+
Asset
turnover
÷ Current Accounts
assets receivable
Total
Net sales
assets + +
Total assets Fixed Other
assets assets
Key relationships
• Net Profit = Revenue - Expenses
• Net Profit Margin = Net Profit / Sales
• Total Assets = (Inventory + Accounts Rec + Other current Assets) +
Fixed Assets
• Asset Turnover = Sales / Total Assets
• Return on Assets
= Net Profit Margin x Asset Turnover
= Profit / Total Assets