CEO: What to do with profit

Balance Sheet

Assests vs Liabilities

2:1 ratio is a healthy business

example:  $10 million is current assets vs $5 million in current liabilities.  ratio is 2:1

 

Pre-tax profit

Pretax profit needs to be greater than 5% to start bonus program

After tax profits

 

So 100% of gross profit

  1.  20-40% goes to taxes
  2. 10% working capital – replacing equipment, inventory,
  3. 5-10% – bonus program
  4. owners draw

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