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The first, short-term ROMI, is also used as a simple index measuring the dollars of revenue (or market share, contribution margin or other desired outputs) for every dollar of marketing spent. For example, if a company spends $100,000 on a direct mail piece and it delivers $500,000 in incremental revenue, then the ROMI factor is 5.0.
GDP measures flows rather than stocks (example: the public deficit is a flow, measured per unit of time, while the government debt is a stock, an accumulation). GDP can be expressed equivalently in terms of production or the types of newly produced goods purchased, as per the National Accounting relationship between aggregate spending and income:
Price and total revenue have a negative relationship when demand is elastic (price elasticity > 1), which means that increases in price will lead to decreases in total revenue. Price changes will not affect total revenue when the demand is unit elastic (price elasticity = 1). Maximum total revenue is achieved where the elasticity of demand is 1.
In other words, this equation allows businesses to determine revenue as well as prepare a statement of retained earnings. This then allows them to predict future profit trends and adjust business practices accordingly. Thus, the accounting equation is an essential step in determining company profitability.
The efficiency ratio indicates the expenses as a percentage of revenue (expenses / revenue), with a few variations – it is essentially how much a corporation or individual spends to make a dollar; entities are supposed to attempt minimizing efficiency ratios (reducing expenses and increasing earnings). The concept typically applies to banks.
From January 2008 to December 2012, if you bought shares in companies when Donald R. Keough joined the board, and sold them when he left, you would have a 9.0 percent return on your investment, compared to a -2.8 percent return from the S&P 500.
The purpose of profit-based sales target metrics is "to ensure that marketing and sales objectives mesh with profit targets." In target volume and target revenue calculations, managers go beyond break-even analysis (the point at which a company sells enough to cover its fixed costs) to "determine the level of unit sales or revenues needed not only to cover a firm’s costs but also to attain ...
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