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In an earlier thread KitKat said
the expansion of margins can at times even outweigh the effects of growth

In my early days as a business consultant I was surprised that most businesses and business people did not focus on margins. Margins and cost control that deliver improved margins were of secondary or sometimes tertiary consideration. Most managers have been over promoted and have lack important business skills. Cost control, funds management, investment management, capital allocation etc all take a back seat to keeping the ship running and pursuing corporate goals. The goal is often expansion via organic or acquired growth, the goal is seldom to expand margins and be as profitable as possible. Returning as much money as possible to shareholders is almost never considered.

If the CEO is from a sales background then there is little chance that cost control and margin expansions are even concepts that s/he is familiar with. Increasing revenue is one of the few goals they understand.

How can this help us? Keep a close eye on the margins and what management say. It is soon possible to judge whether there is any focus on cost control and margin expansion.

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