Any enterprise in the process of economic activity seeks to make a profit from its activities. The ideal formula for any business is to get as much income as possible and spend a minimum of resources on it.

What is used for the assessment?

To assess the activities of an enterprise, a variety of economic and financial indicators are used: the cost of production, the profitability ratio of production, sales margins, cash turnover, capital movement, and many others. Each such indicator has its own calculation method, for example, to determine the profitability, the profitability formula of the main activity of the enterprise is used.

Production and enterprise profitability

The term "profitability" itself has German roots and means "profitability". By assessing profitability, conclusions can be drawn about the effectiveness of the use of funds in the enterprise. But how do you calculate the profitability of your production?

This indicator determines the profit that the manufacturer received per unit of his costs. That is, for example, if the profitability is 20%, then the company received 20 rubles of profit for every ruble that was spent on goods or the provision of services. The lower the profitability, the less the company earns from one conventional unit of production. These theses are confirmed by the profitability formula of the main activity of the enterprise.

Profitability metrics are also called profitability metrics. In fact, it is possible to determine the efficiency and quality of management at the enterprise by calculating the profitability of the main activity of the enterprise. The formula for the calculation is given later in the article. If not used rationally, then profitability will decrease. And with the efficient and economical use of raw materials and other values, it will grow.

The formula for profitability of production will help to find out the level of profitability, which can be used to judge whether it is profitable to engage in such activities or whether it is necessary to redesign production in a different direction. In other words, with the help of mathematics, you can justify the expediency or disadvantage of doing this or that type of activity.

Calculation of profitability

The formula for the profitability of the main activity of the enterprise, which will show the result as a percentage, is as follows:

R osn. = ((Profit from operating activities) / (Cost of production + + Administrative expenses)) * 100%,

Profit from the main activity = (Income of the company from the main activity) - (Cost of production + General production costs + Administrative costs).
The cost of production is the direct cost of running an activity (wages and salaries of workers who are directly involved in the production process, the cost of purchasing and delivering raw materials, materials that are consumed in production, etc.).
General production costs - include the cost of electricity, utilities, paper, cleaning services, remuneration of personnel who are not directly related to the production process, but are employed in servicing business processes (secretaries, technicians, cleaners, security guards, and others), and other costs that cannot be attributed to direct.
Administrative expenses - the costs of maintaining administrative and management personnel, holding meetings and meetings, rewarding employees for high achievements, holding sports competitions and other events, traveling to various conferences for directors, as well as other costs incurred by the enterprise for organizing the production process.

In order to see the coefficient, the formula for the profitability of the main activity of the enterprise is calculated without multiplying by 100%.

In principle, this calculation is also suitable for other types of profitability, only with some modifications. So, for example, the formula for the profitability of production is as follows:

P pr. = ((Profit from the sale of goods) / (Cost of production of goods + General production costs of production of goods + Administrative costs of production of goods)) * 100%.

What is the normal level of profitability?

The first step is to consider the main values of the profitability indicator. The profitability of the main activity, the calculation formula of which is given above, can take on a variety of values. If the coefficient is below zero, then this shows that the company spends more money on the production of goods or services than then earns on their sale.

A coefficient equal to 0 shows this means that the company does not receive profit, but also does not incur financial losses from its activities.

If the profitability is above 0, then the company works for itself in profit.

It should be borne in mind that in different areas of business there is an acceptable profitability of the main activity, the calculation formula of which speaks about this. There is an industry in which it is necessary to cover the risks that a manufacturer encounters in certain areas of their activities.

Russia is no exception. In enterprises that are engaged in different activities, profitability indicators can be radically different. Moreover, an enterprise with a lower profitability will not always be less successful. There are a number of reasons for this, associated with capital turnover and other features of the functioning of enterprises in various sectors of the economy.

Normal profitability in the field of building materials and other production

So, in the industries of production of building materials, as well as in those that have a high transport potential to other countries, the average profitability indicators are at the following level:

operation of oil and gas pipelines (80-90%);
production of cement products (80-85%);
fertilizer production (80-85%);
production and processing of non-ferrous metals (60-65%);
production of rolled metal products (35-40%).

Normal Banking Profitability

In the field of banking services and for financial institutions, the following indicators are observed in the Russian Federation:

clearing services (65-70%);
servicing trade in financial markets (55-60%);
maintenance of registers in the securities market (40-45%).

Normal profitability of human-consumed goods

The production of goods that are consumed by the population has the following profitability indicators:

manufacturing of tobacco products (40-42%);
brewing (25-30%);
production of household appliances (20-25%).

ROI pitfalls

Despite the fact that the formula for the profitability of the main activity of the enterprise is quite simple and straightforward, the final indicator cannot be looked at in a straightforward manner.

There are many methods for analyzing profitability, which characterizes a wide range of different types of its indicators.

First of all, it is important to evaluate and compare the sales volumes of different periods, as well as trace those periods. It often happens when a good and promising business becomes unprofitable precisely because of the wrong approach to assessing the required volumes of production and sales of goods and services.

For example, a manufacturer of any product wanted to increase the profit of an enterprise not by reducing the level of production costs, but by increasing the volume of products.

The formula for the profitability of production at the same time at the output will show that the profitability can fall significantly or even be negative. What is the reason for this? There are many factors. There is always a possibility of loss of sales markets or their volumetric insufficiency. Relations with sellers may deteriorate, or the market simply does not need the output volume, since demand is limited. In simple words, if there is no one to sell the product, then why does it not need to be produced. In case of excess production, the goods will simply lie in warehouses and deteriorate.

You should also consider the rate of capital turnover. For the first example, you need to analyze the time between the initial purchase of raw materials and the point when money was received for the manufactured product. This will be a full production cycle. The profitability of the production of 1 product can be, for example, 50%. If the period of product turnover is long, as well as the volume of production is limited, then in reality the profit may be too small to pay all current costs. That is, the mark of profitability of 50% may not at all indicate the success of the enterprise, but will simply characterize the specifics of the industry and production methods.

How to use the profitability indicator correctly?

Of course, the profitability of production is one of the most important indicators by which you can analyze the efficiency of the enterprise and draw any conclusions about the production process itself.

When analyzing the activities of any enterprise, it will not be enough just to know how to calculate the profitability of the main activity, you need to remember about other indicators, as well as about various It is impossible to extract profitability from the whole system of indicators that it is part of. This is financial stability, and liquidity, and solvency, etc. In addition, it is necessary to conduct a vertical and balance sheet of the enterprise, use financial indicators such as capital turnover, asset movement.

Only in this case it is possible to fully assess the profitability indicator, to determine the prerequisites for such a level and ways to effectively increase it.

A wide range of economic and financial indicators is used to analyze and calculate the efficiency of an enterprise. They differ in the complexity of the calculation, the availability of data, and the usefulness for analysis.

Profitability is one of the optimal indicators of efficiency - the simplicity of calculation, the availability of data and the enormous usefulness for analysis make this indicator a must for calculation.

What is enterprise profitability

Profitability (RO - returnon)- a general indicator of the economic efficiency of the enterprise or the use of capital / resources (material, financial, etc.). This indicator is necessary for the analysis of economic activities and for comparison with other enterprises.

Profitability, as opposed to profit, is a relative indicator, therefore the profitability of several enterprises can be compared with each other.

Profits, revenues and sales are absolute indicators or economic effect and it is incorrect to compare these data from several enterprises, because such a comparison will not show the true state of affairs.

Perhaps an enterprise with a lower sales volume will be more efficient and sustainable, that is, it will bypass another enterprise in terms of relative indicators, which is more important. Profitability is also compared to efficiency(efficiency).

In general terms, profitability shows how many rubles (kopecks) of profit one ruble invested in assets or resources will bring. For profitability of sales, the formula reads as follows: how many kopecks of profit are contained in one ruble of revenue. Measured as a percentage, this indicator reflects the effectiveness of activities.

There are several main types of profitability:

profitability of products / sales (ROTR / ROS - totalrevenue / sale),
return on cost (ROTC - totalcost),
return on assets (ROA - assets)
return on investment (ROI - invested capital)
personnel profitability (ROL - labor)

The universal formula for calculating profitability is as follows:

RO = (Type of profit / Indicator, the profitability of which needs to be calculated) * 100%

In the numerator, the type of profit - most often the profit from sales (from sales) and net profit are used, but it is possible to calculate the balance sheet profit, etc. All types of profit can be found in the income statement (profit and loss).

The denominator contains the indicator whose profitability needs to be calculated. The indicator is always in value terms. For example, find the return on sales (ROTR), that is, the denominator should be an indicator of sales in value terms - this is revenue (TR - totalrevenue). Revenue is found as the product of price (P - price) and sales volume (Q - quantity). TR = P * Q.

The formula for calculating the profitability of production

Return on Cost (ROTC - returnontotalcost)- one of the main types of profitability required for performance analysis. Return on cost is also called cost efficiency, as this figure reflects the efficiency of the production process.

The profitability of production (cost price) is calculated using the following formula:

ROTC = (PR / TC) * 100%

The numerator contains profit from sales / sales (PR), which is the difference between income (revenue - TR - totalrevenue) and expenses (total cost price - TC - totalcost). PR = TR-TC.

In the denominator, the indicator whose profitability is to be found is the total cost price (TC). The total cost price consists of all costs of the enterprise: costs of materials, semi-finished products, wages of workers and AUP (administrative and managerial personnel), electricity and other utility services, shop and plant costs, advertising costs, security, etc.

Materials account for the largest share in the cost price; therefore, the main production is called material-intensive.

The profitability of the cost price shows how many kopecks of profit from the sale will bring one ruble invested in the cost of production. Or, measured as a percentage, this indicator reflects the percentage of efficient use of production resources.

The formula for calculating the profitability on the balance sheet

Many types of profitability are calculated from the balance sheet data. The balance sheet contains information about the assets, liabilities and equity of the organization.

This form is drawn up 2 times a year, that is, the state of any indicator can be viewed at the beginning of the period and at the end of the period. To calculate profitability from the balance sheet, the following indicators are required:

assets (current and non-current);
the amount of equity capital;
investment size;
and etc.

You can't just take any of these metrics and calculate your ROI - that's wrong!

In order to correctly calculate the profitability, you need to find the arithmetic average of the sum of the indicator at the beginning of the current (end of the previous) and the end of the current period.

For example, find the profitability of non-current assets. From the balance sheet, the sum of the values of non-current assets at the beginning and end of the period is taken and divided in half.

In the balance sheet of medium-sized enterprises, the value of non-current assets is reflected in line 190 - Total for section I, for small enterprises the value of non-current assets is the sum of lines 1150 + 1170.

The formula for the return on non-current assets is as follows:

ROA (vn) = (PR / (VnA np + VnA kp) / 2) * 100%,

where VnA np is the value of non-current assets at the beginning of the current (end of the previous) period, VnA kp is the value of non-current assets at the end of the current period.

The return on non-current assets shows how many kopecks of profit from sales will bring one ruble invested in non-current assets.

An example of calculating the profitability of production

To calculate the profitability of production, the following indicators are required: total cost price (TC) and profit from sales (PR). The data are presented in the table.

PR 1 = TR-TC = 1,500,000-500,000 = 1,000,000 rubles

PR 2 = TR-TC = 2,400,000-1200,000 = 1,200,000 rubles

It is obvious that the revenue and profit from the sale of the second company is higher. In absolute terms, the effect of the second company is higher. But does this mean that the second venture is more efficient? Production is required to answer this question.

ROTC 1 = (PR / TC) * 100% = (1,000,000/500,000) * 100% = 200%

ROTC 2 = (PR / TC) * 100% = (1200000/1200000) * 100% = 100%

The profitability of production of the first enterprise is 2 times higher than the profitability of production of the second enterprise. We can confidently say that the production of the first enterprise is 2 times more efficient than that of the second.

Profitability, as an indicator of the efficiency of an enterprise, more accurately reflects the real state of affairs in production, in the field of sales or investments of the enterprise, allowing you to correctly respond to the current situation, in contrast to the use of absolute indicators, which do not give a complete picture.

Video on what shows profitability:

Ministry of Education and Science of the Russian Federation

Saint Petersburg State University of Engineering and Economics

Faculty of Entrepreneurship and Finance

Department of Commercial Activity and Entrepreneurship

Course work in the discipline economics of the organization on the topic:

"Indicators of profitability, their characteristics and methods of calculation"

Saint Petersburg

Introduction p. 3

1. Theoretical foundations of the analysis of enterprise profitability

1.1. Profitability indicators page 4

2. Practical part: analysis of the profitability of LLC Lesopolosa p. 10

Conclusion p. 15

Bibliography page 16

Introduction.

The market economy in the Russian Federation is gaining momentum. Along with it, competition is gaining strength as the main mechanism for regulating the economic process.

In modern economic conditions, the activity of each economic entity is the subject of attention of a wide range of market participants interested in the results of its functioning.

To ensure the survival of an enterprise in modern conditions, management personnel must, first of all, be able to realistically assess the economic condition of both their enterprise and existing potential competitors. Analysis of the financial results of the enterprise is the most important characteristic of the economic activity of the enterprise. However, the ability to really assess the financial condition is not enough for the successful functioning of the enterprise and the achievement of its goal. The competitiveness of an enterprise can only be ensured by the correct management of the movement of financial resources and capital at its disposal.

The purpose of this work is to study the theoretical aspects of analyzing the financial results of an enterprise through one of the main indicators - profitability, as well as in the practical development of the methodology for calculating it for a particular organization. The object of the research is the virtual enterprise Lesopolosa LLC.

1. Theoretical foundations of the analysis of the profitability of the enterprise.

1.1. Profitability indicators.

Profitability is one of the main cost quality indicators of production efficiency at an enterprise, association, industry as a whole, characterizing the level of cost return and the degree of use of funds in the process of production and sales of products.

The functioning of any economic system can be assessed in two main areas:

how quickly the system achieves its goal;

the efficiency with which the system converts costs into revenues.

Despite the close interconnection of these areas, in practice, the second of them is of greatest interest. The management of an enterprise is usually interested in obtaining an integrated assessment of the results of converting costs into income, expressed in the form of complex indicators that are convenient for comparison and comparison, characterizing the efficiency of economic activity in terms of its compliance with the strategic goals of the business.

Among the most important and frequently used are the following profitability indicators:

Product profitability

In general, this indicator is calculated as the ratio of profit from product sales to its total cost.

The use of this profitability indicator is most rational for on-farm analytical calculations, for monitoring the profitability (unprofitableness) of certain types of products, the introduction of new types of products into production, and the withdrawal from production of ineffective products.

This indicator characterizes the real amount of profit that each ruble of the costs incurred for its production and sale brings to the enterprise.

Return on sales

One of the most objective indicators characterizing the unity of the tactical and strategic goals of enterprise development is the profitability of sales, calculated as the ratio of profit from sales to net proceeds:

This indicator characterizes the most important aspect of activity - the sale of products and services, and also estimates the share of cost in sales. It links operational activities to the strategic objectives of the enterprise.

The amount of profitability of sales is influenced by various factors. The main factors of its decrease are:

increased costs of production and sales of products;

drop in sales volumes.

In the first case, it is necessary to subject the cost structure in the cost price to a thorough analysis in order to identify the reason for its growth. In the cost of production, it is necessary to highlight the most significant and growing items, after which it is necessary to analyze the possibility and necessity of their reduction without prejudice to production.

The general sequence of management decisions can be represented in the form of the following steps 1:

highlight the most significant cost items and explore the possibilities of reducing them;

Divide costs into fixed and variable costs and calculate the break-even point;

Analyze the profitability of certain types of products based on the margin ratio, study the need and the possibility of changing the range of products.

In the second case, you should focus on marketing factors, as well as the quality characteristics of products. In general, the indicator of return on sales affects almost all aspects of the enterprise - production, marketing and sales.

Return on assets

In a narrow sense, this indicator expresses the return (income) that falls on the ruble of the assets involved. However, being the most important indicator of economic activity, it allows you to link its various aspects.

The efficiency of using assets is also characterized by their turnover:

Then the return on assets can be represented as:

The resulting ratio makes it possible to conduct further analysis of the factors that have a direct impact on the return on assets.

The reasons for the deterioration in the profitability of assets can be both a decrease in the profitability of sales and a slowdown in their turnover.

If the deterioration of the indicator is more influenced by the drop in sales, you need to focus your efforts on marketing, assortment policy and the pricing system.

Acceleration of turnover can be achieved by reducing working capital, or fixed assets. To do this, consider option 2:

sale or write-off of unused or inefficiently used equipment, reduction of non-production assets;

reduction of stocks of raw materials and materials, work in progress, finished products;

reduction of accounts receivable.

Return on equity

Indicator return on equity is the most important characteristic of the enterprise from the point of view of its shareholders (owners). The formula for calculating it is as follows:

Characterizes the efficiency of using equity capital. The economic meaning of this indicator is how much profit falls on a unit of the company's equity capital.

A change in the values of the return on equity ratio may be caused, for example, by a rise or fall in the quotations of the company's shares on the stock exchange, but it should be borne in mind that the book price of shares does not always correspond to their market price. Therefore, a high value of the return on equity ratio does not necessarily indicate a high return on the capital invested in the company.

Another important indicator is return on invested capital... It shows the effectiveness of the use of capital invested in the activities of a given enterprise for a long time 3.

Production profitability

The indicator is calculated by the ratio of profit from sales or net profit to the amount of costs for products sold or manufactured:

This indicator of profitability can be calculated as a whole for the enterprise, its individual segments and types of products. It shows how much the company has profit from each ruble spent on the production and sale of products.

The indicator of profitability of production activities largely duplicates the coefficient of profitability of sales, i.e. a decrease in the value of the indicator also indicates an increase in production costs of sold products or a decrease in prices for it, with the only difference that the profitability of production activities more clearly shows the effect of growth or reduction in production costs.

You can determine the profitability of production by a coefficient that can be easily calculated from a formula that has been proven over the years.

Balance sheet profit

As mentioned earlier, profit is formed from different areas of production and the end result of all these frauds is balance sheet profit. I would also like to note that balance losses are possible only they are built on the aggregate of all the company's expenses.

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Balance sheet profit - all income (expenses) received from the sale of finished products that are not related to production activities. But you should not mean by implementation exclusively something material, it can be the simplest service and so on, you should broaden your horizons and look as wide and far-sighted as possible.

After all, this type of profit (loss) is calculated on the basis of a careful accounting calculation of production activities for a certain period of time (year, quarter, month, and so on).

What are the elements of the balance sheet profit?

Income or expenses from the sale of a particular named product.
Plus to everything, prosperity or loss of all kinds of funds through the implementation of the main fund.
Ready-made results from non-implementation actions.

An excursion into history or where profitability came from

The first person who guessed what profitability is and what its meaning is - was D. Ricardo. He introduced the exact concept of surplus value, its essence was in mutually beneficial decisions between different persons, so that ruin did not occur. However, David did not take into account one important thing, in the process of creating a product, its value becomes greater and subsequently poured into the finished product.

Speaking about this topic, it is worth recalling one of the main tasks of the economy, namely, the competent redistribution of excess value between other participants in the process.

Karl Marx fully explored and described the emergence of such an extensive mechanism as surplus value and profitability, his labor is relevant to this day. And this hidden mechanism consisted in a living commodity endowed with a brain, namely, labor. It was with a competent miscalculation of this point that it was possible to deduce the profitability of an enterprise by natural mathematical actions.

After these discoveries, it became clear that profitability in the context in which many began to see it is one large-scale financial organism. It is he who shows the main factor of any organization, which visually interprets to the distrustful viewer how much benefit an ordinary company can bring without prejudice to itself. Now the economy is slowly but surely developing, and profitability has a huge weight in it.

How to calculate profitability

Calculating the profitability of an enterprise is an elementary task; you just need to use a formula. But it should be remembered that there are several formulas, there are for the overall profitability of the company as a whole, and there is a subdivided one, return on assets, sales and so on, everything will be written about.

Formulas

The basic formula for calculating the total profitability of an enterprise: Profitability = All income received (balance sheet profit) / (average price category of the main part of production + average price of current assets) * 100%
PP (profitability of sales) = income received from the sale of goods / net profit from sales. In this calculation, there is a normalized average bar that summarizes the many already made miscalculations to create a specialized number with an average value. The natural norm for industrial enterprises is 0-0.4, for trade 0-0.5.
RA (return on assets) = all net income of production / value of assets in a given period of time. The profitability indicator of this section is responsible for the ability to perform the necessary manipulations with assets, as well as competently use the company's property. The normalized values of this coefficient for an industrial company is 0-0.1, and for trade enterprises 0-0.3.
RI (return on investment) = all net profit of the organization / equity + liabilities calculated for the long term. For an accurate calculation, the following values are required:
- Average number of all long-term liabilities (debts).
- The average amount of own funds (not only money, real estate is also included in this item).
RSK (return on equity) = the company's net profit / the whole mass of your savings.

This indicator was created in order to predict the return of shareholders regarding your accounting income, and already on the basis of it, you can draw conclusions on the topic: does your production attract third-party investors, because armed with their support, you can do a lot for the company as a whole.

Norm: PF 0-0.2, TO 0-0.4.

An example of calculating the profitability of an enterprise

In 2009, the taxable earnings of the Easy Game trade organization amounted to 37.809 rubles. It should be noted that the funds at the beginning were negligible (3.500 rubles), and in the final stage amounted to 24.678 rubles. The bottom line for current assets as of January 1, 2009, the Easy Game company has 15.678 rubles, and at the end of the year 46.213 rubles. Next, we will make elementary calculations and find out the profitability of this enterprise.

Profitability = All income received (balance sheet profit) / (average price category of the main part of production + average price of current assets) * 100%

Average value of the main part of production = 24.678 + 3500/2 = 14089.
Average price of current assets = 15.678 + 46.213 / 2 = 30.946.
Profitability = 37.809 / (14.089 + 30.946) * 100% = 83%.

In total, in our case, we got an extremely high result of 83%, which means that at the moment the company is growing before our eyes and we can say that the management policy of the management is working very effectively, nothing needs to be changed just to continue its growth, and if it continues to grow, then profitability will go up, as a result of the total income.

By itself, this concept is extremely vague, since it is impossible to name with certainty the average profitability for a particular production. However, for a long time there have been numbers that have come into use among entrepreneurs, as averages (perhaps this is partly true).

Normal ROI is considered to be 20-60 percent. It should be remembered that it itself is inextricably linked with the exchange rate, as well as high taxation, so when making calculations, you need to pay attention to these factors.

To correlate the dynamics of income and the cost of the organization, this point is important in that it will allow you to see how high the enterprise has risen.
Carefully calculate the proceeds in relation to the credit turnover, if the credit turnover exceeds the company's funds, it means that the bankruptcy procedure may begin soon.
Analyze all the costs of the company, you need to try to reduce unnecessary and meaningless waste of money.
And also all the time to keep track of what type of income the net profit was received from.

After calculating and correlating these aspects, it will be possible to draw strict conclusions about your financial position (profitability).

Hello! Today we'll talk about profitability, what it is and how to calculate it. aimed at making a profit. It is possible to assess the correctness of work and the effectiveness of the applied management methods using some parameters. One of the most optimal and informative is the profitability of the enterprise. For any entrepreneur, understanding this economic indicator is an opportunity to assess the correctness of resource consumption at the enterprise and to adjust further actions in all directions.

Why calculate profitability

In many cases, the financial profitability of an enterprise becomes a key indicator of the analysis of the activity of a business project, which helps to understand how well the investment in it pays off. Correctly calculated indicators for several factors and articles are used by the entrepreneur for, when pricing services or goods, for general analysis at the working stage. They are calculated as a percentage or used in the form of a numerical coefficient: the larger the number, the higher the profitability of the enterprise.

In addition, it is necessary to calculate the coefficients of profitability of the enterprise in the following production situations:

To forecast the possible profit that the company will be able to receive in the next period;
For comparative analysis with competitors in the market;
To justify large investments, helping a potential participant in the transaction to determine the projected return on a future project;
When determining the real market value of the firm during pre-sale preparation.

The calculation of indicators is often used for lending, obtaining loans or participating in joint projects, the development of new types of products.

Enterprise profitability

Dropping scientific terminology, we can define the concept:

Enterprise profitability as one of the main economic indicators that well characterizes the profitability of an entrepreneur's labor. Its calculation will help you understand how profitable the chosen project or direction is.

Many resources are used in the production or sales process:

Labor (employees, personnel);
Economic;
Financial;
Natural.

Their rational and correct operation should bring profit and constant income. For many enterprises, the analysis of profitability indicators can be an assessment of the performance for a certain (control) period of time.

In simple terms, business profitability is the ratio between the cost of the production process and the resulting profit. If after a period (a quarter or a year) the business project has made a profit, then it is called profitable and profitable for the owner.

To carry out correct calculations and predict indicators in future activities, it is necessary to know and understand the factors that, to varying degrees, affect profitability. Experts divide them into exogenous and endogenous.

Among the exogenous are:

Tax policy in the state;
General sales market conditions;
The geographical location of the enterprise;
The level of competition in the market;
Features of the political situation in the country.

In many situations, the profitability and profitability of an enterprise is influenced by its geographic location, proximity to raw material sources or consumer customers. The situation on the stock market and fluctuations in exchange rates have a huge impact.

Endogenous or internal production factors that strongly affect profitability:

Good working conditions for personnel of any level (which necessarily has a positive effect on the quality of products);
Efficiency of logistics and marketing policy of the company;
General financial and management policy of the management.

Taking these subtleties into account helps the experienced economist to make the level of profitability as accurate and realistic as possible.

Factor analysis of enterprise profitability

To determine the degree of influence of any factors on the level of profitability of the entire project, economists conduct a special factor analysis. It helps to determine the exact amount of income received under the influence of internal factors, and is expressed in simple formulas:

Profitability = (Profit from product sales / Cost of production) * 100%

Profitability = ((Product price - Product cost) / Product cost)) * 100%

Usually, when conducting such a financial analysis, they use its three-factor or five-factor model. The number indicates the number of factors used in the calculation process:

For a three-factor, the profitability of manufactured products, an indicator of capital intensity and fixed assets turnover is taken;
For the five-factor, it is necessary to take into account the labor intensity and consumption of materials, depreciation, and the turnover of all types of capital.

The factorial calculation is based on the division of all formulas and indicators into quantitative and qualitative, which help to study the development of the company from different angles. It shows a certain relationship: the higher the profit and capital productivity from the production assets of the enterprise, the higher its profitability. It shows the manager the relationship between regulations and business results.

Types of profitability

In various production areas or types of business, specific indicators of the company's profitability are used. Economists distinguish three significant groups that are used almost everywhere:

Profitability of products or services: the ratio of the received net profit from the project (or direction in production) and the costs spent on it is taken as a basis. It can be calculated both for the whole enterprise and for one specific product;
Profitability of the whole enterprise: this group includes many indicators that help characterize the entire enterprise as a whole. It is used to analyze a working project by potential investors or owners;
Return on assets: a fairly large group of various indicators that show the entrepreneur the feasibility and completeness of using a certain resource. They allow you to determine the rationality of the use of loans, own financial investments or other important assets.

An analysis of the profitability of an enterprise should be carried out not only for internal needs: this is an important stage before large investment projects. It can be requested when granting a loan, or it can become a starting point for the enlargement or reduction of production.

A real complete picture of the state of affairs in the enterprise can be obtained by calculating and analyzing several indicators. This will allow you to see the situation from different angles, to understand the reason for the decrease (or increase) in expenses for any item. This may require several coefficients, each of which will reflect a specific resource:

ROA - return on assets;
ROM - the level of profitability of the product;
ROS - return on sales;
ROFA - profitability of fixed assets;
ROL - personnel profitability;
ROIC - return on investment in the enterprise;
ROE is the return on equity.

These are just a few of the most common odds. To calculate them, figures from open sources are enough - the balance sheet and annexes to it, current sales reports. If a projected estimate of the profitability of a business is needed for a launch, the data is taken from a marketing analysis of the market for similar products or services, from available in the general overview of competitors' reports.

Calculation of the profitability of the enterprise

The largest and most generalized indicator is the level of profitability of the enterprise. To calculate it, only accounting and statistical documentation for a certain period is used. In a more simplified version, the formula for the profitability of the enterprise looks like this:

R = BP / CA * 100%

P is the main profitability of the enterprise;
BP is an indicator of balance sheet profit. It is equal to the difference between the revenue received and the cost (including organizational and administrative costs), but before taxes are deducted;
CA - the total cost of all circulating and non-circulating assets, production facilities and resources. It is taken from the balance sheet and its annexes.

The calculation will require the average annual cost of all tangible assets, the depreciation of which is used in the formation of the selling price for services or goods.

If the assessment of the company's profitability is low, then certain management measures should be taken to improve the situation. Adjustments to production costs, revision of management methods or rationality of resource use may be required.

How to calculate your return on assets

A complete analysis of the profitability indicators of an enterprise is impossible without calculating the efficiency of using various assets. This is the next important stage, which helps to assess how fully all assets are used, to understand their impact on profits. When assessing this indicator, attention is paid to its level. A low one indicates that capital and other assets are underperforming, while a high one confirms the correct management tactics.

In practice, the return on assets (ROA) indicator denotes to the economist the amount of money that falls on one unit of assets. In simple terms, it shows the financial return of a business project. Calculation for all types of assets must be carried out regularly. This will help to timely identify an object that does not bring returns or benefits in order to implement it, lease it or modernize it.

In economic sources, the formula for calculating the return on assets looks like this:

Р - profit for the entire analyzed period;
A is the average value for the types of assets for the same time.

This coefficient is one of the three most indicative and informative for a manager. Receiving a value less than zero indicates that the enterprise is operating at a loss.

Profitability of fixed assets

When calculating assets, the profitability ratio of fixed assets is separately distinguished. These include various means of labor that directly or indirectly participate in the production process without changing the original form. Their term of use should exceed a year, and the amount of depreciation is included in the cost of services or products. These fixed assets include:

Any buildings and structures in which shops, offices, laboratories or warehouses are located;
Equipment;
Heavy vehicles and loaders;
Office and work furniture;
Cars and passenger vehicles;
An expensive tool.

Calculating the profitability of fixed assets will show managers how effective the economic activity of a business project is and is determined by the formula:

R = (NP / OS) * 100%

PE - net profit for a certain period;
OS - the cost of fixed assets.

This economic indicator is very important for commercial manufacturing enterprises. It gives an idea of the share of profit that falls on one ruble of invested fixed assets.

The coefficient directly depends on profitability and should not be less than zero: this means that the company is operating at a loss and irrationally uses its fixed assets.

Profitability of products sold

This indicator is equally important for determining the level of profitability and success of the company. In international economic practice, it is referred to as ROM and is calculated by the formula:

ROM = Net profit / cost

The resulting coefficient helps to determine the efficiency from the sale of manufactured products. In fact, this is the ratio of sales income and the cost of manufacturing, packaging and selling. For an economist, the indicator clearly demonstrates how much in percentage terms each spent ruble will bring.

The algorithm for calculating the indicator of profitability of sold products may be more understandable for beginners:

The period in which it is necessary to analyze the indicator is determined (from a month to a whole year);
The total amount of profit from sales is calculated by adding up all income from the sale of services, products or goods;
The net profit is determined (according to the balance sheet);
The indicator is calculated according to the above formula.

A good analysis will include comparing the profitability of products sold over several periods. This will help to determine the decline or increase in the company's income over time. In any case, you can conduct a deeper consideration of each supplier, group of goods or assortment, work out the customer base.

Return on sales

Margin or return on sales is another essential characteristic when pricing a product or service. It shows how many percent of the total revenue falls on the company's profit.

There is a formula that helps to calculate this type of indicator:

ROS = (Profit / Revenue) x 100%

Different types of profit can be applied as a basis for calculation. The values are specific and will vary depending on the range of products, the line of business of the company and other factors.

Professionals sometimes refer to ROI as the rate of return. This is due to the ability to show the share of the share of profit in total sales revenue. It is also calculated over time to track changes over several periods.

In the short term, the operating profitability of sales can give a more interesting picture, which can be easily calculated using the formula:

Operating profitability of sales = (Profit before tax / Revenue) x 100%

All indicators for calculations in this formula are taken from the "Statement of profit and loss", which is attached to the balance sheet. The new indicator helps an entrepreneur understand what the real share of revenue is contained in each monetary unit of his revenue after all taxes and fees have been paid.

Such indicators can be calculated for a small enterprise, one department or an entire industry, depending on the task at hand. The higher the value of this economic coefficient, the better the enterprise works and the more profit is made to its owner.

This is one of the most informative indicators that helps determine how profitable a business project is. Without calculating it, it is impossible to draw up a business plan, track costs in dynamics or assess the profitability of the enterprise as a whole. It can be calculated using the formula:

R = VP / V, where:

VP - gross profit (calculated as the difference between the proceeds received from the sale of goods or services and the cost price);
В - sales proceeds.

The formula often uses an indicator of net profit, which better reflects the state of affairs in the enterprise. The amount can be taken from the appendix to the balance.

Net income no longer includes income tax, various business and overhead expenses. It includes current operating costs, various penalties and paid loans. To determine it, the calculation of the total revenue that was received from the sale of services or goods (taking into account discounts) is carried out. All expenses of the enterprise are deducted from it.

It is necessary to carefully choose the period of time depending on the task of financial analysis. To determine the results under internal control, the calculation of profitability is carried out in dynamics regularly (monthly or quarterly). If the goal is to obtain an investment or a loan, a longer period is taken for comparison.

Obtaining the profitability ratio gives a lot of information for the management personnel of the enterprise:

Shows the correspondence of real and planned results, helps to assess the effectiveness of the business;
Allows for comparative analysis with the results of other competitors in the market.

If the indicator is low, the entrepreneur needs to think about improving it. This can be achieved by increasing the amount of revenue received. Alternatively, increase sales, slightly raise prices, or start optimizing costs. One should start with small innovations, observing the dynamics of the coefficient changes.

Staff profitability

One interesting relative metric is staff profitability. Almost all enterprises, regardless of their form of ownership, have long taken into account the importance of effective management of human resources. They affect all areas of production. To do this, it is necessary to track the number of personnel, their level of training and skill, improve the qualifications of individual employees.

You can determine the profitability of personnel using the formula:

PE - the net profit of the enterprise for a certain period of time;
ЧШ - the number of staff at different levels.

In addition to this formula, experienced economists use more informative ones:

Calculate the ratio of all staff costs to net profit;
The personal profitability of one employee, which is determined by dividing the costs associated with him by the share of the profit brought to the company's budget.

Such a complete and detailed calculation will help determine labor productivity. On its basis, it is possible to carry out a kind of diagnostics of jobs that may be reduced or need to be expanded.

Do not forget that low-quality or old equipment, its downtime or other factors can affect the profitability of personnel. This can reduce performance and add additional costs.

One of the unpleasant, but sometimes necessary methods is often the reduction in the number of employees. Economists must calculate profitability for each type of staff in order to highlight the weakest and most vulnerable spots.

For small businesses, a regular calculation of this ratio is necessary in order to adjust and optimize their costs. With a small team, calculations are easier, so the result can be more complete and accurate.

Profitability threshold

For many trade and manufacturing enterprises, the calculation of the profitability threshold is of great importance. It means the minimum volume of sales (or sales of finished products) at which the proceeds received will cover all the costs of production and delivery to the consumer, but without taking into account the profit. In fact, the threshold of profitability helps the entrepreneur to deduce the number of sales at which the enterprise will work without loss (but also will not make a profit).

In many economic sources, this important indicator can be found under the name "break-even point" or "tipping point". It means that the company will receive income only when this threshold is overcome and the coefficient increases. It is necessary to sell goods in a quantity that exceeds the volume obtained by the formula:

PR is the threshold (rate) of profitability;
ПЗ - fixed costs for sale and production;
Kvm is the gross margin ratio.

The last indicator is calculated in advance using the formula:

Kvm = (V - Zpr) * 100%

B - the revenue of the enterprise;
Зпр - the sum of all variable costs.

The main factors affecting the profitability threshold coefficient:

Product price for one unit;
Variable and fixed costs at all stages of production and sale of this product (service).

At the slightest fluctuation in the values of these economic factors, the value of the indicator changes up or down. Of particular importance is the analysis of all costs, which economists divide into fixed and variable. The first include:

Depreciation for major facilities and equipment;
Rent;
All utility costs and payments;
Salaries to employees of the enterprise management;
Administrative expenses for their maintenance.

They are easier to analyze and control, and can be tracked in dynamics. Variable costs become more “unpredictable”:

Wages of the entire working staff of the enterprise;
Commissions for servicing accounts, loans or transfers;
Expenses for the purchase of raw materials and components (especially when currency fluctuations);
Payment of energy resources spent on production;
Fare.

If the firm wants to remain consistently profitable, its management must control the rate of return, analyze costs in all respects.

Any enterprise strives to develop and build up capacities, to open up new areas of activity. Investment projects also need detailed analysis, which helps to determine their effectiveness and adjust investments. In domestic practice, several basic calculation methods are often used, giving an idea of what the profitability of a project is:

Methodology for calculating the net present value: it helps to determine the net profit from a new project;
Methodology for calculating the profitability index: it is necessary to generate income per unit of costs;
Method of calculating the marginal efficiency of capital (internal rate of return). It is used to determine the highest possible level of capital expenditure for a new project. The internal rate of return is most often calculated using the formula:

IRR = (current net worth / current initial investment) * 100%

Most often, such calculations are used by economists for specific purposes:

If necessary, determine the level of expenses in the case of project development at the expense of borrowed funds, loans or credits;
To confirm the profitability and documentary evidence of the benefits of the project.

If there are bank loans, the calculation of the internal rate of return will give the maximum allowable interest rate. Exceeding it in real work will mean that a new venture or direction will be unprofitable.

Methodology for calculating the return on investment;
A more accurate modified method for calculating the internal rate of return, for the calculation of which the weighted average cost of the advanced capital or investment is taken;
Accounting rate of return methodology that is applied to short-term projects. In this case, the profitability will be calculated using the formula:

RP = (PP + amortization / amount of investment in the project) * 100%

PE is a net profit from a new business project.

A complete calculation in different ways is done not only before the development of a business plan, but also during the operation of the facility. This is a necessary set of formulas that owners and potential investors use when trying to assess the possible benefits.

Ways to Increase Enterprise Profitability

Sometimes the analysis yields results that require serious management decisions. To determine the way to increase profitability, it is necessary to understand the reasons for its fluctuations. For this, the indicator for the reporting and the previous period is studied. Usually, the last year or quarter in which there was high and stable revenue is taken as the base one. This is followed by a comparison of the two coefficients in dynamics.

The profitability indicator can be affected by changes in the selling price or production cost, an increase in costs or the cost of raw materials from suppliers. Therefore, it is necessary to pay attention to factors such as seasonal fluctuations in customer demand for goods, activity, breakdowns or downtime. Solving the problem of how to increase profitability and, it is necessary to use various ways to increase profits:

Improve the quality of products or services and their packaging. This can be achieved by modernizing and re-equipping its production facilities. Perhaps for the first time this will require serious investments, but in the future it will more than pay off by saving resources, reducing the amount of raw materials or a more affordable price for the consumer. You can consider an option;
Improve the properties of their products, which will help attract new consumers and become a more competitive company in the market;
Develop a new active marketing policy for your business project, attract good management personnel. Large businesses often have an entire marketing department that deals with market analysis, new promotions and finding a profitable niche;
To reduce the cost in various ways in order to compete with a similar range. This should not compromise the quality of the product!

The manager needs to find a certain balance among all methods in order to achieve a lasting positive result and keep the company's profitability indicators at the proper level.

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