The projection of a company goes hand in hand with the revenue that it creates. Sales create a flow of income that the company uses to offset expenses in the operation of the business in order to reach a gross profit, gross profit meaning that taxes and have not been deducted but once the administrative and operational expenses have been deducted from the Income Statement, the company can look at what is called net profit. Net profit should always be positive in the long run, although that is not always possible to predict due to the factors that affect the industry that the company operates in and where it does not. Carrying a loss is necessary at times in order to thrive in the long run. Profitability is important in all business formations including non-profits, because even non-profits have expenses that must be adequately satisfied.

When looking at sales, they should originate from a variety of sources and companies should not limit themselves to a single product or service. Just like when investing in a variety of companies, the services that a company offers must have value but must be moldable enough to provide an opportunity for clients to choose the best option for their needs and what adds value for their organizations. There are two types of costs, one of them is called fixed costs and the second one is called variable expenses. Fixed costs are those expenses that we have to fulfill no matter the month of the year, for example, rent and utilities. Variable costs are based on volume and production of goods and sales of services. Fixed costs are based on directs costs to build a product and the quantity that the company can produce; however, in addition to this expense, there are overhead costs, and those costs are a little bit more difficult to trace because they are not directly associated with the production of a product. The cost of producing and additional product at the same selling value reduces the overhead cost for the companies, such as car factories or the production of mass products. Large companies must be very careful as to how much they are able to spend in their variable costs as they can add a high cost in the long run if the costs are not maintained at a level that can be properly managed.

Fixed costs help us know what our sales should be and how many products we must sell in order to satisfy them. Other costs associated with a profit are the costs of salaries which will be necessary any month of the year. Companies must plan in advance to meet the threshold that will allow them to thrive and to remain afloat during the economic downturns. Keeping debt low and having liquid assets that allow companies to pay for their unexpected expenses is important. There should always be room for events that are not necessarily part of business as usual, companies must learn the trends of their industry, they must know their clients and what they are ready to purchase. Having clarity on what the customer wants is crucial in business because without a product that stands out, other brands will take over and surpass in the amount of sales made and the customers that want their products and services. It is always important to remain vigilant of monopolies that overwhelm the market and that do not allow smaller businesses to thrive and who can offer products that are unique and conversely effective in producing value to customers and people overall.

In accounting, the main financial statements that companies should focus on are Profit and Loss or Income Statement, Balance Sheet, Statement of Cash Flows, and Statement of Stockholders Equity. Stockholders Equity is the value that owners of a company hold, this is the result of subtracting their short- and long-term liabilities or commitments to pay vendors and lenders, from assets, which include cash, plant and equipment, other intangible and tangible assets and bank and brokerage accounts. Equity can be held in stocks which are categorized as preferred and common and depending on the shareholders, have a priority in returns and dividends depending on which they choose to purchase and invest on. Dividends will be paid to investors who are regularly financially involved in the company and can provide a flow of income for the company. There are incentives for providing dividends to investors and thus companies seek to have other companies and individuals invest in their own companies. The amount of equity that comes from debt should remain low in order to add real value to the organization since the origination of the capital should provide a self-sufficient way for organizations to thrive without the need of increasing their liabilities. Investors and creditors are two different types of elements that should be clearly understood as both seek a return; however, investors provide upfront capital that startups often need. Creditors require that companies be well established in order to provide them with funds and startups regularly struggle to reach that milestone. Overall, debt is not always bad, but the basic formula of using just 30 percent of your available credit is a good reference if you are getting ready to swipe you credit card.