Plan for GrowthĬompanies in high-growth industries like SaaS need money to sustain growth. The more accurate you can be in your revenue forecasting, the easier it is to build predictability in your financials and proactively address issues that would negatively impact net income. This means that once net income stabilizes, the company will need time to pay off the preference share dividends before it can pay dividends to equity shareholders. If your net income is consistently low, you need to see where you’re leaking money.īesides that, a low net income also translates into other financial issues.įor example, a company that has issued cumulative preference shares accumulates a liability if it’s unable to pay dividends every year. Net income helps you monitor your business’s financial health - especially as a public company. Because even though you aren’t expected to be profitable now - it’s always the end goal for a business. In most cases, you’re turning a net loss as you fuel growth with venture capital and trying to capture as much market share as possible on your way to an IPO.īut paying attention to trends in net income can help you understand whether your company is on a path to profitability even when you’re burning cash. VC-backed startups and high-growth companies aren’t looking at their bottom line and expecting to see a profit. Here are some examples of net income’s importance : Determine Trends Toward Profitability Net income (or net profit) is key to several decisions you make as a business. Why Net Income Is Important for a Business
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