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What Is Profit?

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Accountants, actuaries and agents all view profit differently. There are many ways to measure profit, but this approach focuses on two primary methods: 1) measuring the “appraisal” value of your business and how it changes; and, 2) using the income statement for net income.

Income statements are already a part of your financial record keeping, but your current income statements may be too general to draw management conclusions. The goal should be to build projections that are presented by product, sales agent or total company.

Projecting the value of your business is much less common; in fact, you may never have had one calculated. It can be a very powerful tool. The perspective is long-term.

For example, how does a financial decision today affect the ultimate value of your company? Is this product line growing or losing value?

But whatever information you have, it should be easy to understand and easy to communicate to others.

Reproduced from National Underwriter Life & Health/Financial Services Edition, November 11, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.