Profitability of company x under inflation – case study

Abstract

Aim of the work: The aim of the work is to present the impact of management profitability in company X on its business continuity in conditions of high inflation. Main research hypothesis: The price of fuels on the market played a special role in managing profitability under inflation conditions in company X. Methodology: The research material is based on the economic categories: profitability and inflation, subject literature and other sources (the author, by analyzing the economic categories: profitability and inflation, tried to discover their impact on the business continuity of company X). The studies used, among others, the Du Pont model, the Quick Test method, the E. Altman method and the β-business paradigm method of Z. Mietlewski. Research results: Return on sales (ROS) ratios in company X in the analyzed period was lower than the inflation rate, and the return on assets (ROA) ratio was higher than the inflation rate, as was the return on equity (ROE) ratio. All of these indicators at company X were significantly above the average in the transport and logistics sector. High inflation was not severe for company X, because the company compensated the increase in fuel purchase prices in this period by raising the rates for transport services, and thanks to the repayment of their loan, it did not experience an increase in interest rates. Hence, e.g. during this period, the company was characterized by high profitability compared to the competition. In 2022, the year of high inflation, the company started to generate profit earlier than in the period of low inflation in 2019-2020. The profitability management model adopted by the company focused on regulating the sale prices of transport services depending on fuel prices and on reducing the costs of external services in the company’s activities. Company X was not at risk of bankruptcy during the period under study and its equity had little impact on its business continuity. A major risk for company X is having only one large contractor in its portfolio, which determines the company’s profitability.