Estimation of the Product Profitability Index Based on the Product Complexity Index

Profit, as presented in financial statements, is one of the most important performance metrics and a key determinant of an economic entity's value. the primary objective of this research is to assess product profitability based on a product complexity index (pci), considering the product's diversity and market reach across different markets. the study analyzes a sample of 500 profitable companies listed in the fortune, spanning the financial years from 2014 to 2018. the analysis employs both panel and pooled data methods. the study aims to estimate the profitability of each product to help investors identify the most profitable products for investment, based on their profitability as determined by the pci. the findings suggest that adopting a new approach focused on producing high-complexity products, rather than merely selecting product types or business activities, along with measuring the profitability index of each product, can enhance decision-making. by examining the relationship between product complexity and profitability, and introducing an index to forecast product profitability, investors who are key users of financial information can make more decisions that are informed. these decisions, based on the optimal combination and selection of products, can foster economic growth and contribute to the development of society. the results show a positive and significant relationship between operating profit and the product complexity index, as well as the estimation of profitability based on product diversity and market reach.