Profits in uncertain conditions

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  1. high profits, an expanding market share, a healthy economy, and the cost of living rising less than two percent per year 2. low profits, stagnant sales growth, uncertain economic conditions, and a projected four percent annual rise in cost of living

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  - high profits, an expanding market share, a healthy economy, and the cost of living rising less than two percent per year - low profits, stagnant sales growth, uncertain economic conditions, and a projected four percent annual rise in cost of living

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  Limitation: A priori knowledge of price is difficult in an uncertain market. Moreover, no product sell on the basis of single price. There are product promotions, discount schemes, etc. with unknown volume effect.

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  The impact on profits is uncertain as it depends upon trade of between cost of funds, contribution margin ratio and cost of bad debts.

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  242455 Decision tree listing profit outcomes ABC Firm faces uncertain revenues and uncertain costs. Its revenue may be $115million, 155million, Or 165 Million, with chances of 0.2, 0.30 and 0.5, respectively.

• Cost structure and profitability

  There are not many options for off-loading fixed costs in a downturn which is why you don't lock in costs during uncertain times. That is why the recovery is SO SLOW.

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  Thus profits cannot be the ultimate goal. b) Uncertain As per freemba, "Profit cannot be ascertained well in advance to express the probability of return as future is uncertain. It is not at possible to maximize what cannot be known."

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