How business becomes profitable

First of all, let us understand how to utilize credit effectively

Say you purchase an item at the rate of 10 rupees and sell it at 15 rupees

Purchase - 10

Selling - 15

Therefore profit - 15 - 10 = 5 rupees

Purchase - Sell - take your profit - Purchase again. This is basically a cycle.

If I run one cycle - 5 rupees profit

10 cycles - 50 rupees profit


This is called TURNOVER

Let us factor in credit here

Each time when you buy, you pay after 60 days

Say you finish the cycle (whatever you bought you sold) on the 10th day itself.

You get 15 rupees without paying any purchase cost

Then you buy for the next cycle for the same credit period of 60 days and you finish the cycle after 10 days of purchase

Likewise, when you do the first payment, you completed 5 cycles but paid only for the first cycle

Revenue for one cycle - 15 rupees

Revenue for 5 cycles - 15*5 = 75 rupees

Per cycle profit - 5 rupees

For 5 cycles - 25 rupees

A bit here is the main part - your purchase payment is just 10 rupees (I e first cycle)

Business profits are based on the number of cycles you run before the credit period.

Recent Posts

See All

Disclaimer: This article is me speaking to me through this blog! Short Intro: If you want to innovate in a particular field, you need to understand how things work in the first place. Innovation is a