Qualitative Considerations and Linear Profit Models

Quality is much better than quantity. One home run is much better than two doubles. Steve Jobs, American entrepreneur and cofounder of Apple Inc. (Burrows & Grover, 2006)

Quantitative data goes only so far in a business: the human element of business and accounting is invaluable. It is difficult for computers and algorithms to determine quality of content. Qualitative considerations matter when making any decision in life, and financial decisions related to linear profit modeling are no exception. For this Discussion, you analyze the qualitative considerations of linear profit modeling. You analyze some of the tools that managers use when they make decisions, develop external reports, and control organizational activities. Specifically, you focus on linear profit modeling as a means for calculating break-even point and target profits.

To prepare for this Discussion, review the article Whopper to Go from this weeks Learning Resources. Then consider how Burger Kings profitability problems can be framed in a linear profit model. (Note: Numbers are not required to frame this problem mathematically.)

Post by Day 3 your response to the following:

How do linear profit models relate to GAAP-basis income statements?

In terms of qualitative considerations, what are the limitations of using linear profit models as it applies to the Burger King example?

Are these limitations present in all linear profit models? Why or why not?

Why might it be useful to frame Burger Kings profitability problems using a linear profit model despite the limitations of the model?

Be sure to support your work with specific citations from this weeks Learning Resources and any additional sources.