Profitability
Profit tree
Last reviewedWhat is Profit tree?
Profit equals revenue minus cost. Revenue splits into price and volume; cost splits into fixed and variable.
When should you use Profit tree?
Any profitability or profit and loss case. It is the default first split.
What are its limits?
It shows where the problem is, not why. You still need the business context and judgment to explain the driver.
How do you tailor it to a case?
Use the numbers to decide quickly whether revenue or cost moved, then expand only that side, with drivers specific to the business.
Use a framework as a source of ideas, then put a structure built for this specific problem on the table. Reciting a framework by name is a common way to lose marks.