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Maintain high profitability of the enterprise which. The concept of enterprise profitability and its main indicators

income profit profitability

Commercial activity cannot do without such a category as profit. The word “commerce” itself is already closely connected in people’s minds with this concept. The classic and simple definition of profit is as follows: profit is defined as the difference between total revenue and total costs.

Before organizing any commercial activities, the entrepreneur tries to calculate how profitable, and therefore profitable, this project will be, since making a profit is the main goal of any commercial organization. However, from the point of view of the Anglo-American financial school, which has received worldwide recognition, the priority in the activities of the enterprise is specifically maximizing the income of the owners. This is due to the need for optimal distribution and use financial resources firms to ensure maximum market value. Such a rational approach will ensure income for owners.

The enterprise has different directions of profit distribution (Fig. 1.1). In turn, the income of the organization is recognized as an increase in economic benefits as a result of the receipt of assets (cash, other property) and (or) repayment of liabilities, leading to an increase in the capital of this organization, with the exception of contributions from participants ( property owners). Only part of the profit remaining after paying taxes and payments to the budget is directed to the development of the enterprise and is called net profit.

An enterprise may have revenue, but this does not mean that it also makes a profit. To identify the financial result, it is necessary to compare revenue with the costs of production and sales, that is, with the cost of production. A company makes a profit if revenue exceeds cost. In a situation where revenue is equal to cost, it is only possible to reimburse the costs of production and sales of products. The costs of purchasing and delivering raw materials are covered and distributed wage workers, but in such a situation there is no profit, but the enterprise has no debts. If costs exceed revenue, then the company receives a loss, a negative financial result, which puts it in a difficult financial situation, debt obligations, and bankruptcy is not excluded. Naturally, the organization strives to improve its position as quickly as possible and rehabilitate itself in the market to the extent possible.

So we see that profit is a kind of benchmark for an enterprise and has a number of functions. In addition to the fact that profit characterizes the economic effect, it also performs a stimulating function, since it is the basis for expanding production, scientific, technical and social development, material incentives for employees. Profit is also one of the main sources of formation of budgets at different levels.

Profit is an absolute indicator of profitability, since absolute indicators make it possible to analyze the dynamics of various profit indicators over several years. It should be noted that in order to obtain the most objective results, indicators should be calculated taking into account inflationary processes. Profit is formed from several components:

§profit from sales of products (sales) Pr is the difference between revenue from sales Вр and the costs of production and sales of products (full cost) Зр, the amount of value added tax (VAT), excise taxes ACC:

Pr = Vr - Zpr - VAT - ACC.

§profit from other sales (Ppr) is the profit received from the sale of fixed assets and other property, waste, not tangible assets. Defined as the difference between revenue from sales (Vpr) and costs of this sale (Zr):

Ppr = Vpr - Zr.

§profit from non-operating operations is the difference between income from non-operating operations (Dvn) and expenses for non-operating operations (Rvn):

Pvn = Dvn - Rvn

It is worth noting that there is a distinction between accounting and economic profit. Economic profit refers to the difference between total revenue and external and internal costs. Profit, determined on the basis of accounting data, is the difference between income from various types activities and external costs.

In a market economy, it is necessary to wisely manage profits, use them not for consumption, but for investment, innovation and maintaining competitiveness. The amount of profit depends on the production, supply, sales and financial activities of the enterprise. Such an indicator as profit says a lot about the efficiency of the enterprise, but there is also the concept of profitability. It is associated with the relative expression of these indicators and plays a role in analyzing the operation of the enterprise. Profit and profitability of an enterprise are directly interrelated.

“Earnings are an increase in economic benefit during an accounting period in the form of an inflow of funds or an increase in the value of assets or a decrease in liabilities, resulting in an increase in capital, unless such growth is provided by contributions from shareholders.”

A briefer concept is defined in the Decree of the President of the Republic of Kazakhstan, which has the force of Law, dated December 26, 1995 No. 2732 “On Accounting”, where Article 13 states: “Income is an increase in assets or a decrease in liabilities in the reporting period.” Without making the appropriate expenses, as a rule, it is impossible to obtain the desired income. Without receiving income, in turn, it is impossible to develop the enterprise and successfully resolve social issues.

Income in a generalized form reflects the results of management, the productivity of living and materialized labor costs. Some economists attribute it to indicators of economic effect, others - to the efficiency of an enterprise. The first ones are right, since the absolute amount of income does not allow us to judge the return on invested funds.

The system of profitability indicators consists, first of all, of absolute indicators of financial results, which include: income from sales of products (works, services), gross income; income from core activities; income from non-core activities; income from ordinary activities before taxes; income from emergency situations; net income, which is the final financial result of the enterprise's activities.

The role of profit in market conditions has increased significantly. As is known, under a planned-directive economy, its role was diminished. Generating income (profit) as an objective function of any enterprise was downplayed. With the transition to a market economy, income (profit) became its driving force. It is he who determines the solution to the fundamental interrelated problems: what to produce, how to produce and for whom to produce. Generating income has become the goal of the functioning of any enterprise, since in a market economy it is the main source of its production and social development. Income growth creates a financial basis for self-financing, which is prerequisite successful management, which is a prerequisite for successful economic activity enterprises. This principle is based on full recovery of costs for production and expansion of the production and technical base of the enterprise. It means that each enterprise covers its current and capital costs from its own sources. If there is a temporary shortage of funds, the need for them can be met by short-term bank loans and commercial loans, if we're talking about on current costs, as well as long-term bank loans used for capital investments.

At the expense of income, part of the enterprise’s obligations to the budget, banks and other enterprises and organizations is also fulfilled. Thus, income becomes the most important indicator for assessing the production and financial activities of an enterprise. It characterizes the degree of its business activity and financial activities of the enterprise. Income determines the level of return on advanced funds and the return on investment in assets of this enterprise.

The role of income in a market economy is determined by the functions it performs. In the specialized literature of the CIS countries there is no consensus on the issue of the income function. They are attributed to him from two to six. In our opinion, it performs only three functions:

1) source of state budget revenues,

2) a source of industrial and social development of enterprises and associations,

3) a source of increasing the well-being of the population.

The unity of functions in their interdependence makes income the element of management in which the economic interests of society, the enterprise team and each employee are linked. This makes clear the importance of the problem of the formation and distribution of income, the practical solution of which ensures the necessary dependence of the efficiency of an economic entity on the amount of income received and left at its disposal. .

In order for income to effectively perform its functions, the following basic conditions are necessary:

Prices for products must, with a certain degree of approximation, express socially necessary labor costs and at the same time take into account the continuous increase in labor productivity and, as a consequence, a reduction in costs.

The system for calculating products and determining the cost of production must be scientifically sound, taking into account state standards.

The income distribution mechanism should play an active role and serve as a stimulating factor for the development of production and increasing its efficiency.

Effective use of income is possible only in the system of all other financial levers (depreciation, financial sanctions, taxation, excise taxes, rent, dividends, interest rates, funds special purpose, deposits, shares, investments, forms of payment, types of loans, exchange rates and securities, etc.).

5. It should, however, be noted that the absolute value of income refers to indicators of economic effect, and not to the efficiency of the financial and economic activities of the enterprise. An income of 500 thousand tenge can be the income of enterprises of different sizes in terms of scale of activity and size of investment. Accordingly, the degree of relative weight of this amount will be different. Therefore, for a more realistic assessment of the income received, relative profitability indicators are used, expressing the level of profitability and characterizing the efficiency of the enterprise.

6. Both the business entity itself and the state are interested in the growth of the enterprise’s profitability indicators. Therefore, at each enterprise it is necessary to conduct a systematic analysis of absolute and relative profitability indicators.

The tasks of analyzing profitability indicators include:

assessment of the implementation of the plan for absolute profitability indicators;

study of the components of the formation of net income;

identification and quantitative measurement of the influence of factors affecting income;

study of directions, proportions and trends in income distribution;

identifying reserves for income growth;

study of various profitability ratios and factors influencing their level.

Since in a market economy the main and final goal of an enterprise’s economic activity is to generate income and not loss, it is necessary to focus on the analysis of this indicator.

The first absolute indicator of profitability is income from sales of products (works, services). It is shown in the “Report on the results of financial and economic activities” minus value added tax, excise taxes, etc. taxes and mandatory payments, as well as the cost of returned goods, sales discounts and price rebates provided to the buyer.

This article of the “Report on the results of financial and economic activities” reflects income from core activities, which can be obtained from the sale of inventory, provision of services, as well as in the form of remuneration, interest, dividends, fees and rent, depending on the main activities.

The largest share in the income structure is occupied by income from the sale of finished products and goods, the value of which is predetermined by the level of production of products, their completeness and quality and other factors that will be discussed below. .

A certain impact on the amount of income from the sale of products is exerted by changes in the balances of unsold products in warehouses and shipped goods that are in safekeeping with buyers. A reduction in inventories or, conversely, an increase in them affects growth in the first case, and a decrease in the amount of income from sales in the second.

At enterprises, income (revenue) from the sale of products should flow from the planned commodity output and changes in the balances of the unsold part of the products - finished products, goods held in safe custody by buyers. However, there are cases of underestimation of sales income plans, in particular, due to overestimation of carry-over inventories. Remains of unsold products are formed for the following reasons.

Part of the finished product naturally settles in the warehouse for its assembly, packaging, preparation for shipment, accumulation to the size of the transport batch, and issuance of payment documents. An increase in the balance of finished products above the standard value should be the subject of attention of the financial services of the enterprise: perhaps the products are not sold due to a breakdown in economic ties or are not in demand for another reason. This phenomenon can occur at enterprises where they produce products that have a natural material form.

The performance of work and services provided, due to their specific form as goods, cannot take the form of product residues in the warehouse. The same applies to the products of some industries, for example, electricity, transport, communications.

Often goods are kept in safe custody by the buyer, i.e. products are shipped and received by the buyer, but the latter legally refused to pay for it. The most likely reason for refusal may be the supplier's failure to comply with the terms of the supply agreement.

The transition to the accrual method has led to the fact that income from the sale of products is determined by the quantity shipped, and not as payment is received for it. This does not mean that analysts should not pay attention to the receipt of money for shipped products.

The second absolute indicator is gross income. It represents the financial result from the sale of products (works, services) and is defined as the difference between the income from the sale of products (works, services) and the production cost of sold products (works, services) as a result of the main activity.

The most important factor influencing gross income is production cost, so its reduction is noticeably affected by its value.

Under stable economic conditions, the main way to increase gross income is to reduce costs in terms of material costs. This is especially important for enterprises in manufacturing and processing industries (mechanical engineering and metalworking, metallurgical, petrochemical, textile, food, etc.), where the share of the cost of raw materials in the cost of production is very high.

Increase in the volume of product sales in physical terms, with other equal conditions leads to increased income. Increasing volumes of production of products that are in demand can be achieved with the help of capital investments, which requires the use of income for the purchase of more productive equipment, the development of new technologies, and the expansion of production. This path is now difficult or almost impossible for many enterprises due to inflation, rising prices and the unavailability of long-term lending. Businesses that have the means and capacity to make capital investments actually increase their income if they ensure their income and return on investment is above the rate of inflation.

The income of enterprises is growing at a high rate, mainly due to rising prices. An increase in price in itself is not a negative factor. It is quite justified if it is associated with an increase in demand for products, with an improvement in the technical and economic parameters and consumer means of manufactured products.

The next absolute indicator of profitability is income from core activities. It represents a balanced financial result and is defined as the difference between gross income and expenses of the period according to the formula:

D° = D V - R p (1)

D° - income from core activities

D in gross income

R n expenses of the period.

The greater the gross income and the lower the period expenses, which are fixed costs that are not included in the production cost of goods sold, the higher the income from core activities. .

Relative indicators of profitability include indicators of profitability (profitability), characterizing the efficiency of an enterprise, which in a market economy determines its ability to financially survive, attract sources of financing and their profitable (profitable) use.

Profitability indicators are important characteristics factor environment of enterprise profit formation. Therefore, they are mandatory when conducting a comparative analysis and assessing the financial condition of an enterprise. When analyzing production, profitability indicators are used as a tool for investment policy and pricing.

The main profitability indicators can be grouped into the following groups:

return on capital (assets) indicators,

product profitability indicators;

indicators calculated on the basis of cash flows.

The first group of profitability indicators is formed as the ratio of profit to various indicators of advanced funds, of which the most important are; all assets of the enterprise; investment capital (equity + long-term liabilities); share capital

Net profit Net profit Net profit

All assets Investment capital Share capital (2)

The discrepancy between the levels and profitability of these indicators characterizes the degree to which the enterprise uses financial levers to increase profitability: long-term loans and other borrowed funds.

These indicators are specific to Tim, which meet the interests of all business participants of the enterprise. For example, the administration of an enterprise is interested in the return (profitability) of all assets (total capital); potential investors and creditors - return on invested capital; owners and founders - profitability of shares, etc.

Each of the listed indicators is easily modeled using factor dependencies. Consider the following obvious relationship:

Net profit Net profit Sales volume

Total assets = Sales * Total assets (3)

This model reveals the relationship between the profitability of all assets: profitability of sales and asset turnover. Economically, the connection lies in the fact that the formula directly indicates ways to increase profitability; when the return on sales is low, it is necessary to strive to accelerate asset turnover.

Let's consider another factor model of profitability.

Net profit Net profit Volume of sales Sov. capital

Aks. capital = Sales volume * Sov. capital * Shares Capital(4)

As we can see, the return on equity (shareholder) capital depends on changes in the level of product profitability, the rate of turnover of total capital and the ratio of equity and debt capital. The study of such dependencies has great importance to assess the influence of various factors on profitability indicators. From the above relationship it follows that, other things being equal, the return on equity capital increases with an increase in the share of borrowed funds in the total capital.

The second group of indicators is formed on the basis of calculating the levels and profitability of profit indicators reflected in the reporting of enterprises.

For example,

These indicators characterize the profitability of products for the base (K 0) and reporting (K 1) periods.

For example, product profitability based on sales income:

K 0 = P 0 / N 0 ; (6)

K 1 = P 1 / N 1 ; (7) Or

K 0 = (N 0 -S 0) / N 0; (8)

K 1 = (N 1 -S 1) / N 1; (9)

K = K 1 -K 0 , (10)

where - P 1,P 0 - income from sales of the reporting and base periods;

N 1, N 0 - sales of products (works, services) of the reporting and base periods;

S 1, S 0 - cost of products (works, services) of the reporting and base periods;

K is the change in profitability in the reporting period compared to the base period.

The influence of the factor of change in sales volume is determined by calculation (using the method of chain substitutions)

Accordingly, the impact of a change in cost will be

The sum of factor deviations gives the overall change in profitability in the reporting period compared to the base period:

K = ?K n - ?K s (13)

The third group of profitability indicators is formed similarly to the first and second groups, however, instead of profit, the net cash inflow is taken into account. NPV - net cash inflow

ChPDS ChPDS ChPDS

Sales volume Total capital Own capital (14)

These indicators give an idea of the extent to which an enterprise can pay creditors, borrowers and shareholders with cash in connection with the use of existing cash inflows. The concept of profitability calculated on the basis of cash flow is widely used in countries with developed market economies. It is a priority because operations with cash flows ensuring solvency is an essential sign of the state of the enterprise. .

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Analysis of enterprise profitability indicators

Introduction

In a market economy, a correctly developed economic strategy, an optimally drawn up economic development plan, a management system and effectively organized accounting together ensure the financial stability of the subjects of economic relations.

Effective use of all types of production resources, reducing costs and increasing profitability are the main strategic objectives of any agricultural enterprise. Accounting, which completely, continuously, interconnectedly reflects any business transactions supported by documents, ensuring the reliability, timeliness and overall accuracy of information.

Currently, some changes have occurred in the understanding of accounting: the concept of accounting, all objects of which are reflected in valuation, has been transformed into financial accounting, and operational accounting into management accounting.

Regardless of what the buyer and seller are guided by, both want to understand whether it is worth selling and whether it is worth buying, how much the business is really worth, what problems and profits it will bring in the future, which method of sale (purchase) is easier and more profitable.

In the specialized literature, the term “transparency” of a company is used, which means that it is possible to obtain real information about the business and its financial and economic activities relatively quickly and without problems, without in-depth long-term analysis.

Many domestic enterprises are opaque - accounting and tax reporting contains significant distortions, due either to the weak level of economic personnel, or to a reflection of various mechanisms for evading the tax burden.

Also, the assessment of the value of a business is carried out expertly based on the analysis of all significant data that may affect the cost of carrying out the necessary economic calculations.

What methods are used for these purposes? Based on the calculation of the cost of the enterprise and the planned level of profitability of the transaction. The basis for determining the selling price of an enterprise can be taken from the estimated value of the enterprise’s assets, cleared of liabilities, but not at accounting prices, but adjusted to market prices.

In a market economy, profitability indicators, which are relative characteristics of the financial results and efficiency of an enterprise, become of great importance.

There are several groups of profitability indicators:

1) indicators characterizing the profitability of production costs and investment projects;

2) indicators characterizing the profitability of sales;

3) indicators characterizing the profitability of capital and its parts.

When analyzing profitability, it is necessary to determine individual indicators profitability in the reporting and previous periods, establish the trend of their change and determine the influence of individual factors on each of the profitability indicators.

1 . Enterprise income structure

profitability profitability capital asset

In conditions market relations for adoption management decisions you need to know not only the amount of profit the enterprise receives, but also their profitability. Profitability characterizes the efficiency of the enterprise and the skill of investment management. The main parts of profitability are profit, but the profit that is given in the calculations is a rather conditional value. In practice, it is carried out: in accordance with a number of documents, in accordance with regulatory documents.

The concept of income is more capacious than profit. IN explanatory dictionary“income” is the flow of cash. Income- This cash, which come to the disposal of the enterprise in various forms. In modern economic conditions, along with profit, an enterprise can receive other income (dividends, interest on deposits, etc.).

That's why final result from financial and economic activities it would be correct to call it not balance sheet profit, but income on the balance sheet.

The company has at its disposal temporarily free funds that are of a targeted nature, which are regularly received on the account. Such amounts of funds can only be used after a certain period of time. These are depreciation deductions, deductions to any reserve funds, for the creation of other funds provided for by law. When a reserve or other fund is created on the balance sheet, the profit itself decreases. These deductions are not included in the profit, but they remain at the disposal of the enterprise.

To determine the amount of funds of an enterprise, it is necessary to determine:

1) the amount of net profit

2) the amount of depreciation charges

3) the amount of accrued reserve funds from profits.

They characterize the profitability of the enterprise for the reporting period.

2. Absoluteenterprise profitability indicators

The economic feasibility of operating an enterprise in a market economy is determined by the receipt of income. The profitability of an enterprise is characterized by absolute and relative indicators. The absolute indicator of profitability is the amount of income or profit. In specialized foreign literature, the concept of “income” is defined as follows: “Income” is an increase in economic benefits during a domestic period in the form of an influx of funds or an increase in the value of assets or a reduction in liabilities, which leads to capital growth, except in cases where such growth is provided by contributions from shareholders.” Since in a market economy the main and final goal of an enterprise’s economic activity is to generate income and not loss, it is necessary to focus on this indicator.

The first absolute indicator of profitability is income from sales of products (works, services). It is shown in the report on the results of financial and economic activities minus value added tax, excise taxes, etc. taxes and mandatory payments, as well as the cost of returned goods, sales discounts and price rebates provided to the buyer. This article of the report on the results of financial and economic activities reflects income from the main activity, which can be received from the sale of inventories, provision of services, as well as in the form of remuneration, interest, dividends, fees and rent, depending on the main activity. When determining the degree of return on invested capital, a whole system of interrelated indicators is used. Each of these indicators has its own meaning for reporting users and has its own economic interpretation. When analyzing profitability, several calculation methods can be used, but most often they are calculated as a ratio of some type of income and some kind of comparison base.

Indicators(numerator):

1. Profit or income from the main activities of the enterprise, i.e. profit from the sale of products, services, type of work. This is the financial result of the enterprise for which the enterprise was created.

2. Profit or loss from financing activities. This is the balance between income and loss on operations not related to the sale of products, taking into account interest for using a bank loan.

3. Income from investment activities. That part of the profit from financial and economic activities, which is the amount of income from any financial investments in shares of other enterprises, shares, bonds.

4. Book income or book profit. This is the amount of income from financial and production activities enterprises.

5. Net profit. This is part of the balance sheet profit minus contributions to the reserve and other similar funds, minus the amount of profitable payments, minus income tax.

6. Profit is at the complete disposal of the enterprise. This is an absolute indicator, equal to income after completion of all distribution operations, differs from net profit by the amount of accrued dividends on shares.

7. Net result of the operation of investments = the amount of book profit + interest on the loan.

This is the economic effect obtained by the enterprise from the use of invested capital. This indicator can be considered as payment for financial assets placed at the disposal of enterprises or as income from equity or borrowed capital.

8. Cash flow. The amount of funds that a company has at its disposal, albeit temporarily

Cash flow = net profit + accrued depreciation + reserve fund.

Denominator of absolute indicators:

1. Revenue from sales of products excluding VAT and excise taxes.

2. Own capital = authorized capital + amount of reserve capital + amount of reserve funds + amount of retained earnings from previous years + amount of funds social sphere+ amount of targeted funding + amount of budget revenues + amount of intersectoral extra-budgetary funds.

3. Net assets = the sum of own sources of funds + the sum of long-term liabilities.

This is the amount of funds invested in the enterprise.

Profitability indicators can be calculated either for a specific date or based on average annual data.

3. These indicators are divided into:

a) indicators of profitability of the enterprise’s activities

b) return on equity indicators

c) indicators of profitability of the enterprise's assets.

3. Analysis of relative profitability indicators

Relative indicators of profitability, as mentioned above, include indicators of profitability (profitability), characterizing the efficiency of the enterprise, which in a market economy determines its ability to express financially, attract sources of financing and their profitable (profitable) use. They measure the profitability of an enterprise from various positions and are grouped in accordance with the interests of participants in the economic process and market exchange. Since profitability ratios are important characteristics of the factor environment for generating income (profit) of an enterprise, they are mandatory elements of comparative analysis and assessment of the financial position of the enterprise.

Profitability indicators:

1. Self-financing rate = Balance sheet profit (6) / Amount of products sold * 100.

This indicator reflects the profit that the enterprise has from each ruble of products sold. It characterizes the ability of an enterprise to self-finance, it is important in developing financing policies and can be considered as an opportunity for intensive development.

2. Rate of business income = Net profit (5) / Sales revenue * 100.

Gives an idea of the results of the enterprise’s economic activities and the degree of strength of its position. This indicator characterizes the strength of the enterprise in the sales market. Decrease-reduction in supply of products.

3. Profitability of products sold = Profit from sales (1) / Revenue from sales * 100.

Managers use this indicator to monitor the relationship between the quantity of products sold, their prices, and the value of production costs.

Return on equity indicators:

4. Return on equity = Net profit (5) / Owner's equity.

This is a key investment indicator; in the West it is called the rate of return on equity. Shareholders and investors pay attention to this indicator Special attention, since he the best way shows how much profit each ruble of own funds brings.

5. Total profitability = Balance sheet profit / Equity*100.

This indicator characterizes the activities of the enterprise, the profitability of the enterprise from all types of activities per 1 ruble of equity capital. This indicator is used when analyzing working capital. This capital can be characterized by its share in the total amount of assets. This is the ratio of debt capital and equity capital.

Return on assets indicators:

6. Net profitability = Net profit / net assets * 100. Provides an estimate of return on equity.

7. Return on total capital = Net result (7) / net assets * 100.

In foreign practice, this indicator is considered as one of the main ones and characterizes the performance of the enterprise.

Liquidity analysis

In market conditions, the activity of an enterprise and its development is carried out mainly through self-financing, that is, its own capital. Only when own financial resources are insufficient, borrowed funds are attracted. In these conditions, financial independence from external borrowed sources becomes especially important, although it is difficult, almost impossible, to do without them.

It is important to establish not only the actual amount of equity capital, but also to determine its share in the total amount of capital. This indicator in the specialized literature goes by different names (ownership coefficient, independence coefficient, autonomy coefficient), but its essence is that it determines how independent an enterprise is from borrowed funds and is able to maneuver its own funds.

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Why calculate profitability

In many cases, the financial profitability of an enterprise becomes a key indicator for analyzing the activities of a business project, which helps to understand how well the funds invested in it pay off. Correctly calculated indicators for several factors and items are used by the entrepreneur for 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: than larger number, the higher the profitability of the enterprise.

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

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

Calculation of indicators is often used when lending, obtaining loans or participating in joint projects, developing new types of products.

Enterprise profitability

Discarding 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 ( wage-earners, staff);
Economic;
Financial;
Natural.

Their rational and correct operation must bring profit and constant income. For many enterprises, analysis of profitability indicators can become an assessment of operating efficiency for a certain (control) period of time.

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

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

Among exogenous ones there are:

Tax policy in the state;
General sales market conditions;
Geographical location of the enterprise;
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 geographical position, proximity to sources of raw materials or consumer clients. The situation is having a huge impact on stock market and currency fluctuations.

Endogenous or internal production factors that greatly influence profitability:

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

Taking into account such subtleties helps an experienced economist 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 special factor analysis. It helps determine the exact amount of income received under the influence internal factors, and is expressed by simple formulas:

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

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

Usually when such financial analysis use his three-factor or five-factor model. Quantity refers to the number of factors used in the counting process:

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

Factor 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 an enterprise, the higher its profitability. It shows the manager the relationship between standards and business results.

Types of profitability

In different production areas or types of business, specific indicators of enterprise profitability are used. Economists identify three significant groups that are used almost everywhere:

Profitability of products or services: the basis is the ratio of the net profit received from the project (or direction in production) and the costs spent on it. It can be calculated both for the whole enterprise and for one specific product;
Profitability of the entire 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 using loans, your own financial investments or other important assets.

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 may be requested when providing a loan, or it may become the starting point for enlarging or reducing production.

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

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

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

Calculation of enterprise profitability

The largest and most general 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 enterprise profitability looks like this:

P= BP/SA*100%

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

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

If the assessment of the enterprise's profitability is low, then certain management measures should be taken to improve the situation. It may be necessary to adjust production costs, reconsider management methods or rationalize the use of resources.

How to calculate return on assets

A complete analysis of an enterprise's profitability indicators 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 and understand their impact on profit. When assessing this indicator, pay attention to its level. A low value indicates that capital and other assets are not performing sufficiently, while a high value confirms the correct management tactics.

In practice, the return on assets (ROA) indicator for an economist means the amount of money that falls on one unit of assets. In simple words, 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 return or benefit in order to sell it, lease it or modernize it.

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

P – profit for the entire analyzed period;
A - average value by asset type over the same period.

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

Return on fixed assets

When calculating assets, the profitability ratio of fixed assets is separately identified. These include various means labor who directly or indirectly participate in the production process without changing the original form. The period of their use must exceed a year, and the amount of depreciation is included in the cost of services or products. Such basic means include:

Any buildings and structures in which workshops, offices, laboratories or warehouses are located;
Equipment;
Heavy duty vehicles and loaders;
Office and work furniture;
Passenger cars and passenger transport;
Expensive tool.

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

R = (PR/OS) * 100%

PE – net profit for a certain period;
OS – 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 losses and is using its fixed assets irrationally.

Profitability of products sold

This indicator is no less important for determining the level of profitability and success of the company. In international economic practice, it is designated as ROM and is calculated using the formula:

ROM=Net profit/cost

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

The algorithm for calculating the profitability of products sold 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;
Net profit is determined (according to the balance sheet);
The indicator is calculated using the above formula.

A good analysis will include a comparison of profitability of products sold over several periods. This will help determine the decline or increase in the company’s income over time. In any case, you can conduct a more in-depth review of each supplier, group of products or assortment, and work through the customer base.

Return on sales

Margin or return on sales is another important consideration when pricing a product or service. It shows what percentage of total revenue comes from the profit of the enterprise.

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

ROS= (Profit / Revenue) x 100%

As a basis for calculation, can be used different types arrived. Values are specific and vary depending on the product range, company activity and other factors.

Sometimes experts call return on sales the rate of profitability. This is due to the ability to show the share of profit in total sales revenue. It is also calculated over time to track changes over several periods.

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

Operating return on sales = (Profit before tax / Revenue) x 100%

All indicators for calculations in this formula are taken from the “Profit and Loss Statement”, which is attached to balance sheet. The new indicator helps the entrepreneur understand what real share of revenue is contained in each monetary unit of his revenue after paying all taxes and fees.

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 performs and the more profit its owner receives.

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 over time, 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 revenue received from the sale of goods or services and the cost);
B – proceeds from sale.

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

Net profit no longer includes income tax, various selling and overhead expenses. It includes current operating costs, various penalties and paid loans. To determine it, the total revenue that was received from the sale of services or goods (including discounts) is calculated. All expenses of the enterprise are deducted from it.

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

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

Shows the correspondence between actual and planned results, helps evaluate business performance;
Allows you to conduct a comparative analysis with the results of other competing companies 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. An alternative is to increase sales, raise prices slightly, or optimize costs. You should start with small innovations, observing the dynamics of changes in the coefficient.

Personnel profitability

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

The profitability of personnel can be determined using the formula:

PE – net profit of the enterprise for a certain period of time;
CH – number of employees at different levels.

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

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

Such a complete and detailed calculation will help determine labor productivity. Based on it, you can carry out a kind of diagnostics of jobs that may be reduced or need to be expanded.

Do not forget that the profitability of personnel may be affected by low-quality or old equipment, its downtime or other factors. This can reduce performance and incur additional costs.

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

For small enterprises, regular calculation of this coefficient is necessary in order to adjust and optimize their expenses. With a small team, it is easier to carry out calculations, so the result can be more complete and accurate.

Profitability threshold

For many trading and manufacturing enterprises, calculating the profitability threshold is of great importance. It means the minimum volume of sales (or sales of finished products), at which the revenue received will cover all costs of production and delivery to the consumer, but without taking into account profit. In fact, the profitability threshold helps the entrepreneur determine the number of sales at which the enterprise will operate without losses (but will not make a profit).

In many economic sources, this important indicator can be found under the name “break-even point” or “critical point”. It means that the enterprise will receive income only if it overcomes this threshold and increases the coefficient. It is necessary to sell goods in quantities that exceed the volume obtained according to the formula:

PR – threshold (norm) of profitability;
FZ – fixed costs for sales and production;
Kvm – gross margin coefficient.

The last indicator is pre-calculated using the formula:

Kvm=(V – Zpr)*100%

B – enterprise revenue;
Zpr – the sum of all variable costs.

The main factors influencing the profitability threshold ratio:

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

With the slightest fluctuation in the values of these economic factors, the value of the indicator also changes up or down. Special meaning It also has an analysis of all expenses, which economists divide into constant and variable. The first include:

Depreciation for fixed assets and equipment;
Rent;
All utility costs and payments;
Salaries of enterprise management employees;
Administrative costs for their maintenance.

They are easier to analyze and control, and can be monitored over time. Variable costs become more “unpredictable”:

Wages of the entire workforce of the enterprise;
Fees for servicing accounts, loans or transfers;
Costs for the purchase of raw materials and components (especially when exchange rates fluctuate);
Payment for energy resources spent on production;
Fare.

If a company wants to remain consistently profitable, its management must control the rate of profitability and analyze expenses for all items.

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

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

VNR= ( net worth current/amount of initial investment current)*100%

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

If necessary, determine the level of expenses in the case of developing a project using raised funds, loans or credits;
To prove cost-effectiveness and document the benefits of the project.

If there are bank loans, calculating the internal rate of return will give the maximum allowable interest rate. Exceeding it in real work will mean that the new enterprise 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;
An accounting rate of return technique that is used for short-term projects. In this case, profitability will be calculated using the formula:

RP=(PE + depreciation/amount of investment in the project) * 100%

PE – net profit from a new business project.

A full calculation in various ways is done not only before developing 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 produces results that require serious management decisions. To determine how to increase profitability, it is necessary to understand the reasons for its fluctuations. To do this, the indicator for the reporting and previous periods is studied. Typically, the base year is the past year or quarter in which there was high and stable revenue. What follows is a comparison of the two coefficients over time.

The profitability indicator may be affected by changes in selling prices or production costs, increases in costs or the cost of raw materials from suppliers. Therefore, it is necessary to pay attention to factors such as seasonal fluctuations in the demand of product buyers, activity, breakdowns or downtime. When solving the problem of how to increase profitability and, it is necessary to use various ways profit increase:

Improve the quality of products or services and their packaging. This can be achieved by modernizing and re-equipping its production facilities. This may require serious investment at first, but in the future it will more than pay off in resource savings, a reduction in the amount of raw materials, or a more affordable price for the consumer. You can consider the option;
Improve the properties of your 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 and attract good management personnel. Large enterprises often have an entire marketing department that deals with market analysis, new promotions, and finding a profitable niche;
Various ways to reduce costs in order to compete with a similar range. This should not come at the expense of the quality of the product!

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

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