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Strategic Profit Model Essay

305 words - 2 pages

NOTES FOR THE STRATEGIC PROFIT MODEL

The Strategic Profit Model (also know as the DuPont Model) gives a visual view of an organization's finances and provides the ability to understand and analyze financial performance and return on investment (ROI).

The tool provides visibility to the inter-relationship between the three major categories that contribute to ROI:  Margins, Asset Utilization and Capitalization through combinations of debt and equity.
Everything has an impact on ...view middle of the document...


* Increasing inventory and accounts receivable turnover.
* Managing capitalization.
the Strategic Profit Model has been valuable to evaluate "what if" scenarios.
the ROI (return on investment) is how much profit or cost saving is realized. An ROI calculation is sometimes used along with other approaches to develop a business case for a given proposal.
Spm sometimes is used to show asset turnover and return on equity.
Asset turnover-is the ratio of sales to total assets and indicates how the organization is utilizing its assets in relation to sales.
Return on Equity- indicates the return the stockholders are realizing on their equity in the organization.

SPM is a tool that can be used to show you a calculated way to analyze organizations profitability, and it can also be used to gauge an organization’s financial performance. SPM shows asset turnover, the ratio of sales to total assets and indicates how the organization is utilizing its assets in relation to sales. It also shows return on equity, which indicates the return the stockholders are realizing on their equity in the organization. The benefit of using SPM is that it gives a visual view of an organization's finances and provides the ability to understand and analyze financial performance and return on investment.

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