What Counts More, Profit Or Sales?

 SURESH SENAPATY

 Chief Finance Officer and corporate executive VP, finance,

 Wipro Limited

 SALES

 To create stakeholder value, an organisation should be profitable and demonstrate profit growth. It has to constantly innovate to be relevant to its customers.

 To create superior value, it has to grow ahead of the market and gain market share, and while doing so, satisfy customers and build lasting relationships with them.

 In this context, top-line and top-line growth present themselves as very useful metric for management. The value of focusing on top-line growth comes from the fact that the revenue has a direct influence on four sources of value creation.

 1) Revenue growth determines profit growth. The best way to grow profits is to grow revenues. The alternative that has often been suggested is wide-spread cost cutting such as downsizing.

 While such initiatives do yield higher profits in the short run, I have long held the view that these do not create wealth, but simply arrest wealth destruction, that too temporarily.

 Moreover, in businesses that have very low margin, revenue growth is the only way to profit growth.

 In Wipro