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


MORE THE CYCLE MORE THE 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.

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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