Page 85 - IMDR MSME BOOK 2021

Managing Finance in Micro, Small & Medium Enterprises
versus actual costs. Effective variance analysis can help
a company spot trends, issues, opportunities, and
threats to short-term or long-term success .It is evident
from the analysis that majority of the respondents found
analysis of labour, Overhead and sales variance to be
important and material variance analysis to be very
important. It reveals that the respondent rms are
ensuring the cost controlling and effective use of factor of
production with the help of variance analysis. The sales
variance helps to analyse the performance of sales
department and to set sales target to achieve the
standards. It helps to gure out remedial actions to be
taken by the rms in case of unfavourable variance.

Protability Analysis
An analysis of cost and revenue of the rm which
determines whether or not the rm is proting is known
as protability analysis. The key parameters to assess
the protability of the organisation are gross prot
margin, net prot margin and business segment prot.
The growth prospects for the company and achievement
of wealth maximisation goal are generally assessed
based on trends in turnover, prots and capital
structure of the company. In the present study it is found
that majority of the sample business units analyse
protability for each line of business/segment which
help to assess the prot or loss generated by a particular
product line of a business. It is also found that in the
majority of cases the an average growth rate per year
during last three years has remained between 10%-25%
in case of Sales, Net prot before tax, Net prot after tax
and Capital. The growth of capital in around 76% of the
respondent rms signies the expansion of the business
of the organisation, though the rate of growth differs but
the uptrends in the revenue and capital has been
observed.