Business as usual

I just finished reading Case in Point by Marc Consentino. It's a prep book for consulting case interviews, at firms like BCG and McKinsey. I picked it up because I'd like to better understand how corporate logic, the economy and the healthcare market affect me as a physician. I figured a book like this would be a good starting point, and contain advice on how to stay on top of business and finance topics.

One tool Consentino mentions, that I like, looks like this:

E(P=R-C)M

It's a tool used when analyzing the profits and losses of a company.

The E on the left stands for the economy. If profits are down at a select company, it might be tempting to think it's because of internal factors. But it could just as well be due to external factors. For example, the current blockade of the Hormuz strait is having oil prices surge. This affects a wide array of players (e.g. the transport and packaging industries, as well as individual car owners, etc.) all over the globe.

The M on the right stands for the market. Yet again, external factors might be at play. A banale example would be how the weather influences ice cream sales. As summer ends, chances are sales are down not just for one, but all players on the ice cream market... It's a market trend, rather than the internal affairs of a singular company.

The P=R-C within the parantheses, finally, stand for profits = revenue - costs. This is more straightforward and is where my mind immediately went when I read about profit and loss. How many units is the company selling? What are the margins? How much does transport, packaging, labor cost?

I like simplicity of the tool, and how it acts as a reminder to not only look internally. What's going on in the economy at large? What's happening on this company's specific market?