Definition

profitability analysis

Profitability analysis is a component of enterprise resource planning (ERP) that allows administrators to forecast the profitability of a proposal or optimize the profitability of an existing project. Profitability analysis can anticipate sales and profit potential specific to aspects of the market such as customer age groups, geographic regions, or product types.

Profitability analysis can help key personnel in an enterprise to:

Identify the most and least profitable clients.
Identify the most and least profitable products or services.
Discover which sources of information offer the most reliable facts.
Optimize responses to changing customer needs.
Evolve the product mix to maximize profits in the medium and long term.
Isolate and remedy the causes of decreasing profit margins.

Related glossary terms: asset liability management, ERP finance module, contract management software, budgeting, planning and forecasting (BP&F), financial application

Contributor(s): Stan Gibilisco

This was last updated in April 2012

Posted by: Margaret Rouse

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