AN OPTIMIZATION OF THE FINANCIAL RESULT BY THE PRICE ELASTICITY OF SALES METHODJournal: MEST Journal (Vol.5, No. 1)
Publication Date: 2017-01-15
Authors : Emilia Vaysilova;
Page : 150-155
Keywords : ;
Nowadays, companies operate in conditions of market economy. These market conditions, although providing entrepreneurial freedom and opportunities for initiative, in their deepest essence are too vague and dynamic. This uncertainty is further exacerbated by the growing globalization. In such an economic environment, it is imperative that managers objectively assess and manage their business. The financial results of sales are key business indicators to assess the business activity. The latter is determined by various factors - direct and indirect. Revenues from sales are one of the direct factors. The magnitude of these revenues is determined by both sales volume and sales prices. In this regard, the selling price, as one of the determining factors regarding financial results should be subject to ongoing research by management. This study examines the method "price elasticity of sales" as one of the important tools for economic management. This is a method that provides the capability to optimize the ratio of "price – sales". Optimizing this ratio regarding specific products ensures maximum profit and increases the profitability of the enterprise. Continuous analysis to determine the elasticity of specific products in respect to their price suggests also the implementation of an adequate pricing policy. This study presents not only the analysis methodology but also an exemplary case study demonstrating the application of the model of the price elasticity of sales. The conclusion of the report highlights that maintaining optimal ratio between price and sales volume is a key factor to improve profitability. The dynamics of market factors requires that the elasticity of products should be continuously monitored and targeted corrected.
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