Return on sales is a ratio. Return on sales based on net profit - formula

Profitability- a relative indicator characterizing the degree economic efficiency use of any resource (material, monetary, labor). It is calculated using special formulas and usually has a percentage expression. Profitability can be called the most important indicator for assessing the activities of a commercial enterprise.

This concept is used very widely and is divided into several types, but, in principle, it represents the ratio of what is received from an activity to any asset or resource.

Therefore, the profitability ratio is calculated by dividing the amount of profit by the value of interest. Both values ​​are taken in the same units. Since it is quite difficult to express profit in non-monetary form, the denominator is also given in monetary terms. Most often, profitability is calculated as a percentage.

It should be noted that the approach to profitability ratios is not as strict as to purely mathematical formulas; there is a replacement of words that are similar in sound and content to concepts. Thus, the profitability of production can be considered both as the profitability of the process and as the profitability of the production complex. Therefore, it is worth considering not only the name of the term, but the components of a specific formula and their practical meaning.

The most common profitability indicators are:

• Product profitability(sold) - the profit received from the sale of a certain amount of products is divided by the cost of these products.

It is calculated in approximately the same way profitability of services sold. Only the denominator includes the costs of providing the quantity of services specified in the numerator.

• Return on fixed assets- the ratio of net profit from activities for the period to the cost of fixed assets.
• Enterprise profitability- equal to the ratio of profit to the total cost of fixed and working capital of the enterprise
• Personnel profitability- represents the ratio for a certain period to the average number of personnel for the specified period.

The following indicators are also used:

• General- the ratio of net profit for the period to the average total value of the enterprise's assets.
• - the same as the above ratio, but in relation to the organization’s own capital.
• Return on assets used- profit before taxes and mandatory interest in relation to the amount of equity capital and long-term loans.

The list of profitability ratios used is not limited to those listed above. With the development of economic and financial relations, investment development, new, previously unused coefficients appear. General rule their unifying factor could be approximately expressed as the ratio of the amount of benefit received (profit) to the resource used to obtain it.

Let us dwell on the indicators most frequently used in our conditions and, therefore, informative for us:

Return on sales(ROS, from English Return on Sales) - very important indicator, reflecting the share of profit in the total amount (turnover). Most often, the calculation uses profit before taxes - operating profit. This seems justified, since the amount of taxes is not directly related to the efficiency of activities, and profitability is, first of all, an indicator of economic effect. But it can also be applied net profit margin. This allows you to better visualize the real benefits of sales.

Accordingly, return on sales can be calculated using the following formulas:

Total return on sales = Gross profit/ Revenue;

Net return on sales = Net profit / Revenue.

The concept of revenue can be replaced by the concept of turnover, which does not affect the essence of the relationship.

These coefficients are used primarily to estimate current state business Return on sales allows you to determine the operational efficiency of the organization, i.e. her ability to organize and control current activities. Which, in turn, shows the direction of the company’s movement, decline or growth.

Profitability products sold is defined as the ratio of profit from the sale of products to the amount of costs for the production and sale of these products. Included in costs, in in this case, turn on material costs for production (cost of raw materials, components, energy, etc.), labor costs, overhead costs, trading costs.

Rrp = (CPU - PSP)/PSP x 100;
Where:

• Ррп - profitability of sold products;
• SP - selling price of the product;
• PSP is the full cost of this product.

Sometimes this ratio is called the profitability of production (as a process).

The profitability of production (as a production complex) is calculated as the ratio of the amount of profit (total) to the sum of the costs of fixed and standardized working capital.

ORP = OP/(OS+OBS);

Where ORP is the overall profitability of production;

OS - fixed assets of the enterprise (buildings, structures, equipment);

OBS - standardized working capital (inventory, semi-finished products for production cycle, finished products in warehouses).

Based on the above, we can conclude that the concept of profitability is very broad. Methods and formulas for its calculation are a flexible working tool for determining profitability and benefits from certain investments in material, human and other resources and assets.

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The profitability indicator is extremely important for analyzing the efficiency of an enterprise in a specific period. V general view reflects the relationship of one indicator to another.

Return on sales reflects the performance of the enterprise in the reporting period. This indicator is not suitable for medium- and long-term planning.

Formula for calculating return on sales

Return on sales reflects what share of the company's revenue (income) is profit. Traditionally, the share of net profit in revenue is calculated, but to solve specific practical problems it is possible to find the share of gross, balance sheet and other types of profit in revenue.

By gross profit

The profitability of sales based on gross profit is called GrossProfitMargin and is calculated as the ratio of gross profit to revenue. This profitability is called gross return on sales.

GPM=VP/TR,

where VP – , TR – revenue. This profitability reflects how many kopecks of gross profit are contained in one ruble of revenue.

The gross profit indicator is indicated in the income statement. The gross profit value can be found using the formula:

where TC is the total cost.

Revenue is found as the product of price (P - price) and sales volume (Q - quantity):

By operating profit EBIT

Return on sales based on operating profit is called Return on Sales and is calculated as the ratio of operating profit to revenue (sales volume in value terms - TR - Total Revenue). Return on sales based on operating profit is called operating return on sales.

ROS=EBIT/TR,

where EBIT is operating profit (Earnings before Interests and Taxes), TR is revenue. This profitability reflects how many kopecks of operating profit are contained in one ruble of revenue.

The amount of operating profit must be calculated based on the items in the financial results statement using the formula:

EBIT = line 2300 “Profit (loss) before tax” + line 2330 “Interest payable”.

It is an intermediate indicator between sales profit and net profit.

Return on sales - balance sheet formula

The return on sales indicator can be calculated using balance sheet data using the formula:

RP = profit (loss) from sales / revenue (net) from sales

RP = line 050 / line 010 f. No. 2,

where line 050 is profit/loss from sales (in form No. 1 - the enterprise’s balance sheet), line 010 is revenue (net) from sales (in form No. 2 - the income statement).

RP = line 2200 / line 2110,

where line 2200 is profit/loss from sales, line 2110 is revenue from sales.

Return on sales calculated using data financial statements, reflects the share of profit from sales in the company's revenue.

Net return on sales

Net return on sales is also called return on sales based on net profit is called Net Profit Margin and is calculated as the ratio of net profit to revenue (sales volume in value terms - TR - Total Revenue). This is how many kopecks of net profit are contained in one ruble of revenue.

NPM=PP/TR,

where PE is net profit, TR is revenue. Both figures can be found on the income statement. You can calculate your net profit and revenue yourself.

P – price, Q – number of units sold (sales volume – quantity).

PE=TR-TC-Pr+PrD-N,

where net profit is defined as revenue minus total cost (TC – Total cost), other expenses, taxes and adding other income. Other income and expenses depend on the non-core activities of the enterprise - these are exchange rate differences, purchase/sale valuable papers, participation in the activities of other enterprises through authorized capital, etc.

Return on sales must be calculated to analyze the share of various types of profit in revenue. This indicator, calculated over several periods, allows us to identify profit dynamics and quickly make changes to activities to improve profitability indicators.

There are no clear standard values ​​for profitability of sales - normative meaning indicator largely depends on the specifics of the activity.

Video - return on sales: formula, example of calculation and analysis

Discussion (5)

Calculating profitability is a necessary matter, but, unfortunately, many people neglect this, and as a result, numerous bankrupt enterprises appear. And why? Yes, because many entrepreneurs lack economic knowledge in such matters. Specific formulas will help in this difficult matter. After all, in business it is important to calculate every step you take, and assessing profitability is one of the most important points in understanding how successful your business is.

You helped me calculate profitability for key types of profit when completing pre-graduation internship at my home enterprise PJSC Irkut. Due to the “delicate point”, the profitability indicators are annual, as well as the relative change for the reporting periods (year). Meanwhile, they have been negative SINCE 2012. There is something to think about, especially since we are talking about an enterprise that produces combat fighters that are not inferior to their world counterparts from developed countries.

I was involved in transport and forwarding activities and had never bothered with formulas like these before. I always calculated the revenue and profitability of the business, roughly speaking, “on my fingers.” In principle, profitability formulas are interesting, although not in all areas. They may not take root in the service sector, but in the area wholesale trade they are necessary. Especially in those areas where you need to take into account several indicators per expense item.

When I opened my own business (catering), I calculated my profits differently. The result is a negative year, and almost complete ruin. Then, of course, recalculation and additions. Business has taken a slightly positive turn. I calculated everything from scratch, for almost each of the above, and brought the income to net profit. Of course, if I were more experienced, I would immediately take advantage of it, but we learn from mistakes. When opening or expanding a business, it is imperative to fully calculate income and expenses. Especially large enterprises They may simply “not survive” in the market without accurate calculations.

Of course, it is necessary to calculate these indicators at the enterprise! After all, many organizations, especially those related to small and medium-sized businesses, simply do not keep data on the formation of profitability - this must be recognized))) But in fact, this is an integral part of doing business in any area of ​​​​business. Moreover, for each sulfur these indicators are relative. By the way, as for small businesses, of course, not all indicators will be useful to us, and this is understandable... All trading enterprises who are engaged various kinds types of transactions for the sale of something, use calculations of profitability of sales formulas. I work in wholesale myself trading company We are engaged in the sale of food products. So, all of the above indicators are extremely useful to us and we use them when compiling reports.

It describes the final (net) performance of the organization.

The indicator reflects the share of net profit (loss) in the company's revenue.

Calculation formula (according to reporting)

Line 2400 / line 2110 of the income statement * 100%

Standard

Not standardized

Conclusions about what a change in indicator means

If the indicator is higher than normal

Not standardized

If the indicator is below normal

Not standardized

If the indicator increases

Positive factor

If the indicator decreases

Negative factor

Notes

The indicator in the article is considered from the point of view not of accounting, but of financial management. Therefore, sometimes it can be defined differently. It depends on the author's approach.

In most cases, universities accept any definition option, since deviations according to different approaches and formulas are usually within a maximum of a few percent.

The indicator is considered in the main free service and some other services

If you see any inaccuracy or typo, please also indicate this in the comment. I try to write as simply as possible, but if something is still not clear, questions and clarifications can be written in the comments to any article on the site.

Best regards, Alexander Krylov,

The financial analysis:

• Definition Profitability of core activities is the ratio of profit (loss) from sales to revenue. The indicator characterizes the share of profit (loss) received by the organization in its core activities. That…
• Definition Return on sales is an indicator characterizing the level of gross profit (loss) in revenue. It describes the basic performance of an organization. It can be considered the markup level of the enterprise...
• Definition Retained earnings (uncovered loss) 1370 is the amount of retained earnings or uncovered loss of an organization. It is equal to the amount of net profit (net loss) of the reporting period, i.e....
• Definition Other 2460 - these are other indicators that influence the amount of the organization’s net profit: taxes paid when applying special tax regimes, penalties and fines, surcharges for...
• Definition Deferred tax assets 1180 are an asset that will reduce income taxes in future periods, thereby increasing after-tax profits. The presence of such an asset...
• Definition Net profit (loss) 2400 is the net profit (loss) of the organization, i.e. retained earnings (uncovered loss) reporting period Net profit (loss) is the result of the organization’s activities...
• Definition Current income tax 2410 is the amount of income tax generated according to tax accounting for the reporting (tax) period. In the site services the meaning of this...
• Definition Borrowed funds 1410 are long-term (for a period of more than 12 months) loans and borrowings received by an organization. An organization can transfer reporting to short-term reporting when the deadline...
• Definition Other liabilities 1450 are other liabilities of the organization, the maturity of which exceeds 12 months, which are not included in other groups of the 4th section of the balance sheet. Their presence...
• Definition Earnings before taxes (EBT) - profit (loss) before taxes. For analysis, we can consider the line analogue of profit (loss) before tax (2300)…

The main criterion for assessing the effectiveness of any activity commercial organization are profitability and profitability ratios. Next, we will consider the methodology for calculating these indicators.

Return on Capital Employed (ROCE)

The ratio is calculated as the ratio of net profit minus dividends on preferred shares to ordinary share capital. The formula for calculating the indicator is as follows:

ROCE = Earnings before interest and tax (EBIT) / Capital employed

ROCE = (Net profit - Dividends on preferred shares) / Annual average common share capital

The average annual value of assets is calculated on the basis of the enterprise's balance sheet as half the sum of the value of assets at the beginning and end of the year or as the arithmetic average of the balance sheet values ​​at the end of the quarters included in the reporting year.

The Return on capital employed indicator is used by financiers as a measure of the profitability that a company generates on its invested capital. This is usually necessary to compare performance between various types business and to assess whether the company generates enough profits to justify the cost of raising capital.

If the company does not have preferred shares and is not obligated to pay dividends, then the value of this indicator is equivalent to Return on equity (ROE).

Return on Invested Capital (ROIC)

This ratio is calculated as the ratio of the company's net operating profit to the average annual total invested capital. The formula for calculating the indicator is as follows:

ROIC = (Net operating profit - adjusted taxes) / Invested capital

ROIC = NOPLAT / Invested capital * 100%

where, NOPLAT is net operating income less adjusted taxes.

Invested capital is capital invested in the main activities of the company. Only capital invested in the company's main activities should be counted as invested capital, just as the profit considered is profit from the main activities. In general terms, invested capital can be calculated as the sum of current assets in core activities, net fixed assets and net other assets (less non-interest bearing liabilities). Another calculation option is that invested funds are considered the sum of equity capital and long-term liabilities. The details of determining the amount of capital invested will depend on the accounting practices and business structure.

The main condition that must be achieved is that the analysis must take into account that and only that capital that was used to obtain the profit included in the calculation. In practice, they often resort to a simplified approach, in which the main activities of the company are not highlighted, and the analysis is carried out on all investments and all income. The error of this assumption will depend on what the company’s non-operating profit will be in the period under review and how large the investment in non-core activities will be. Taking into account possible assumptions, the ROIC formula can be written in other forms:

ROIC = ((Net Income + Interest * (1 - Tax Rate)) / (Long-term loans + Equity)) * 100%

ROIC = (EBIT * (1 - Tax rate) / (Long-term loans + Equity)) * 100%

Indicators of the amount of investment are taken according to the average annual value (defined as the amount at the beginning and end of the year, divided in half). In all cases, when calculating given coefficient it is intended to use data from annual reports about profits and losses. If quarterly or other reporting is used in the calculation, the coefficient must be multiplied by the number of reporting periods in the year.

Return on Total Assets (ROTA)

Return on total assets (ROTA) is usually calculated as the ratio of net profit to average assets. The advantages of using this ratio are clear: maximizing ROTA forces managers to increase revenue, reduce costs and non-productive expenses (attributable to profit), and reduce the value of assets (by getting rid of non-productive assets, reducing accounts receivable and payable). Calculated using the formula:

ROTA = EBIT / Total net assets

ROTA = EBIT / Enterprise assets

where EBIT is profit minus taxes and interest (operating profit).

The ROTA indicator is similar with the only difference that when calculating ROTA, operating profit is used rather than net profit.

One of the invisible but significant disadvantages of ROTA at first glance is the deterioration of this indicator as a result of attracting borrowed capital. In addition, focusing on this indicator does not contribute to optimizing the structure of assets and does not take into account the seasonal specifics of a particular type of activity.

The ROTA indicator is especially useful to use as an additional indicator to compare the efficiency of using the assets of holdings with a diverse range or vertical integration. In this case, it is possible to assess whether investments in a given asset (machines, premises, stocks of raw materials in a warehouse) for the production of certain products bring the required return, and to form an optimal set of assets for the production of the optimal assortment.

Gross Margin Ratio (GPM)

Another name for this ratio is Gross margin ratio. Demonstrates the share of gross profit in the company's sales volume. Calculated using the formula:

GPM = Gross profit / Revenue

GPM = (Revenue - cost of goods sold) / Revenue

GPM = Gross Profit / Total Revenue

The calculation is made for different periods of time, using the total values ​​for the period.

Operating profit margin (OPM)

The indicator shows the share of operating profit in sales volume. Calculated using the formula:

OPM = Operating income / Revenue

OPM = Operating profit / Total revenue

Net profit margin (NPM)

Demonstrates the share of net profit in sales volume. Calculated using the formula:

NPM = Net income / Revenue

NPM = Net Profit / Total Revenue

Coefficients assessing the return on capital invested in an enterprise. The calculation is made for an annual period using the average value of the corresponding items of assets and liabilities. For calculations for a period of less than one year, the profit value is multiplied by the appropriate coefficient (12, 4, 2), and the average value for the period is used current assets. To obtain percentage values, as in previous cases, it is necessary to multiply the coefficient value by 100%.

Return on Net Assets (RONA)

Profitability net assets demonstrates the ratio of net profit to the average annual value of non-current assets and net working capital.

RONA = Net income / (Fixed assets + (Current assets - Current liabilities))

RONA = Net Profit / Net Assets

For industrial enterprises, the formula for calculating return on net assets will be as follows:

RONA = (Plant revenue - Сosts) / Net assets

The calculation of return on net assets is similar to the calculation of return on assets (ROA), but unlike RОА, RONA does not take into account the company's associated liabilities.

Note that the profitability indicator does not directly evaluate capital expenditures; RONA reminds managers that there are costs for acquiring and maintaining assets.

Return on Current Assets (RCA)

The RCA indicator demonstrates the company's ability to provide a sufficient amount of profit in relation to the company's working capital used. The higher the value of this ratio, the more efficiently working capital is used. Calculated using the formula:

RCA = Net income / Current assets

RCA = Net Profit / Working capital

Return on Fixed Assets (RFA)

This profitability ratio demonstrates the company’s ability to provide a sufficient amount of profit in relation to the company’s fixed assets. The higher the value of this ratio, the more efficiently fixed assets are used. Calculated using the formula:

RFA = Net income / Fixed assets

RFA = Net profit / Non-current assets

In the process of analyzing business activities, the indicator of product profitability is widely used. This indicator is determined by the ratio of profit from sales or net profit from core activities to the amount of costs for products sold. Profitability a separate type production is determined by the ratio of profit from the production (sales) of this product to the total cost of this type of product.

Product profitability characterizes how much profit or self-financing income a business entity has from each ruble spent on the production and sale of products.

Formulas for calculating product profitability:

1. Profitability of all products sold:

R=,R=
,

where R is the profitability of products sold, %;

P – profit from sales, rub.;

Z – costs of production and sales of products, rub.;

PE – net profit from core activities, rub.

2. Profitability of certain types of products:

R ISD =
,

where R IZD is the profitability of a particular type of product, %;

Сi – cost price of the i-th type of product, rub.

Return on sales

Sales profitability is one of the most important indicators of a company's performance. The indicator is calculated as the ratio of profit from the sale of products (works, services) or net profit to the cost of products sold (the amount of revenue received).

This coefficient shows how much profit from sales the enterprise receives from each ruble of products sold. In other words, how much remains with the enterprise after covering the cost of production. If the result is expressed not as a percentage, but in kopecks, then it will show how many kopecks of profit from sales are received from each ruble of revenue from the sale of products.

Formulas for calculating profitability of sales:

1. Profitability of sales for the enterprise as a whole:

R PR =
, R PR =
,

where R PR is the profitability of sales for the enterprise as a whole, %;

P PR – profit from sales, rub.;

In PR – sales revenue (including indirect taxes or without indirect taxes), rub.;

PE – net profit, rub.

2. Profitability of sales of certain types of products:

R PRizd =
,

where R PRizd is the profitability of sales of certain types of products, %;

Цi – price of the i-th type of product, rub.;

Сi – cost price of the i-th type of product, rub.

The return on sales indicator characterizes the most important aspect of the company's activities - the sale of main products, and also evaluates the share of cost in sales. This indicator reflects only the operating activities of the enterprise. It has nothing to do with financial activities.

Return on assets

Return on assets is a comprehensive indicator that allows you to evaluate the results of the core activities of an enterprise. It expresses the return that accrues per ruble of the company's assets.

Return on assets is determined using the following formulas:

,
,

where R A – return on assets, %;

A - average cost assets for the period, rub.

This ratio shows the efficiency of asset management of an organization through the return on every ruble invested in assets and characterizes the generation of income by a given company. This indicator is also another characteristic of resource productivity, but not through sales volume, but through profit before tax.