Target return on sales. Calculation of the profitability of the enterprise

Hello! Today we will talk about profitability, what it is and how to calculate it. aimed at making a profit. To assess the correctness of the work and the effectiveness of the applied management methods, you can use 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 the expenditure of resources at the enterprise and 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 a business project, which helps to understand how well the funds invested in it pay 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: than more number the higher the profitability of the enterprise.

In addition, it is necessary to calculate the profitability ratios of an 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 company during pre-sale preparation.

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

Profitability of the enterprise

Discarding scientific terminology, we can designate the concept:

Profitability of the enterprise as one of the main economic indicators, which well characterizes the profitability of the entrepreneur's work. Its calculation will help to understand how profitable the chosen project or direction is.

In the process of production or sales, many resources are used:

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

Their rational and proper operation should bring profit and a steady income. For many enterprises, the analysis of profitability indicators can become an assessment of the effectiveness of work for a certain (control) period of time.

In simple words, the profitability of a business 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 made 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 that affect profitability to varying degrees. Experts divide them into exogenous and endogenous.

Among the exogenous are:

• Tax policy in the state;
• General sales market conditions;
• Geographic 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 affected by its geographical location, proximity to sources of raw materials or consumer customers. The situation has a huge impact on stock market and fluctuations in exchange rates.

Endogenous or internal factors of production that have a strong impact on profitability:

• Good working conditions for personnel of any level (which necessarily affects the quality of products positively);
• Efficiency of logistics and marketing policy of the company;
• General financial and managerial policy of management.

Taking into account such subtleties helps an experienced economist to make the level of profitability as true 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 \u003d (Profit from sales of products / Cost of production) * 100%

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

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

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

The factor calculation is based on the division of all formulas and indicators into quantitative and qualitative ones, which help to study the development of the company from different angles. It shows a certain relationship: the higher the profit and return on assets from the production assets of the enterprise, the higher its profitability. It shows the manager the relationship between standards and results. economic activity.

Types of profitability

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

1. Profitability of products or services: the ratio of the net profit received 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;
2. 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;
3. Return on assets: enough large group various indicators that show the entrepreneur the appropriateness and completeness of the use of a certain resource. They allow you to determine the rationality of using loans, your 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 may be required when granting a loan, or it may become the starting point for the consolidation or reduction of 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, to understand the reason for the decrease (or increase) in expenses for any items. This may require several coefficients, each of which will reflect a specific resource:

1. ROA - return on assets;
2. ROM - the level of profitability of products;
3. ROS - return on sales;
4. ROFA - profitability of fixed assets;
5. ROL - personnel profitability;
6. ROIC - return on investment in the enterprise;
7. ROE - return on equity.

These are just a few of the most common odds. To calculate them, there are enough numbers from open sources - the balance sheet and its appendices, current sales reports. If an estimated business profitability assessment is required for launching, the data is taken from a marketing analysis of the market for similar products or services, from competitor reports available in the general overview.

Calculation of the profitability of the enterprise

The largest and most generalized indicator is the level of profitability of the enterprise. For its calculation, only accounting and statistical documentation for a certain period is used. In a more simplified version, the formula for the profitability of an enterprise 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 the revenue received and the cost (including organizational and management costs), but before taxes;
• CA - the total value of all current and non-current assets, production capacity and resources. It is taken from the balance sheet and appendices to it.

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 profitability of the enterprise is low, then certain management measures should be taken to improve the situation. It may be necessary to adjust production costs, review management methods or resource efficiency.

How to Calculate Return on Assets

A complete analysis of the profitability 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 profit. When evaluating this indicator, pay attention to its level. A low level indicates that the capital and other assets are not working enough, and a high level confirms the correct management tactics.

Practically, the return on assets (ROA) means for an economist 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 with regularity. This will help to timely identify an object that does not bring returns or benefits in order to sell it, lease it or modernize it.

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

• P - profit for the entire analyzed period;
• A - the average value by type of assets for the same time.

This coefficient is one of the three most indicative and informative for the manager. Getting a value less than zero indicates that the company 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 are directly or indirectly involved in the production process without changing the original form. The term of their use must exceed a year, and the amount of depreciation is included in the cost of services or products. These main assets include:

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

The calculation of 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 is using its fixed assets irrationally.

Profitability of sold products

This indicator is no less 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 effectiveness of the sale of manufactured products. In fact, this is the ratio of sales revenue and the cost of its manufacture, packaging and sale. For an economist, the indicator clearly demonstrates how much, in percentage terms, each ruble spent will bring.

More understandable for beginners may be the algorithm for calculating the profitability of products sold:

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

A good analysis will include a comparison of the profitability of products sold over several periods. This will help determine the decline or increase in the company's income in dynamics. In any case, you can conduct a deeper review of each supplier, product group or range, work out the client base.

Profitability of 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 is accounted for by the profit of the enterprise.

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

ROS= (Profit / Revenue) x 100%

As a basis for calculation, can be used different types arrived. The values ​​are specific and vary depending on the product range, the company's line of business and other factors.

Sometimes experts refer to the profitability of sales as the rate of return. This is due to the ability to show the share of the share of profit in the total sales proceeds. It is also calculated in dynamics in order to track changes over several periods.

In the short term, a more interesting picture can be given by the operating margin of sales, which is easy to calculate 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 the balance sheet. The new indicator helps the entrepreneur understand what the real share of revenue is contained in each monetary unit its earnings after payment of all taxes and duties.

Such indicators can be calculated for a small enterprise, one department or an entire industry, depending on the task. The higher the value of this economic coefficient, the better the enterprise works 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 its calculation, it is impossible to draw up a business plan, track costs in dynamics, or evaluate the profitability of the whole enterprise. 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);
• B is the proceeds from the sale.

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

Net profit no longer includes income tax, various commercial 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 (including discounts) is carried out. All expenses of the enterprise are deducted from it.

It is necessary to carefully choose the time interval depending on the task of financial analysis. To determine the results of internal control, the calculation of the profitability of profit is carried out in dynamics on a regular basis (monthly or quarterly). If the purpose 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 compliance of real and planned results, helps to evaluate the effectiveness of the business;
• 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. As an option - increase sales, slightly increase prices or optimize costs. You should start with small innovations, observing the dynamics of changes in the coefficient.

Staff profitability

One of the interesting relative indicators is the profitability of personnel. Almost all enterprises, regardless of the form of ownership, have long taken into account the importance effective management labor resources. They affect 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.

You can determine the profitability of personnel by the formula:

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

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

1. Calculate the ratio of all staff costs to net profit;
2. 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. On its basis, it is possible to carry out a kind of diagnostics of jobs that can 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 give additional costs.

One of the unpleasant, but sometimes necessary methods is often the reduction of the number of employees. Economists must calculate the cost-benefit for each type of workforce to highlight the weakest and most vulnerable areas.

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

Profitability threshold

For many commercial and industrial enterprises great importance has a calculation of the threshold of profitability. 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 bringing to the consumer, but without taking into account profits. In fact, the profitability threshold helps the entrepreneur to deduce the number of sales at which the company will operate without loss (but not make a profit).

In many economic sources, this important indicator can be found under the name "breakeven point" or "critical point". It means that the company will receive income only if 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 - threshold (norm) of profitability;
• PZ - fixed costs for sales and production;
• Kvm - gross margin ratio.

The last indicator is calculated preliminary according to the formula:

Kvm \u003d (V - Zpr) * 100%

• B is the company's revenue;
• Zpr - the sum of all variable costs.

The main factors affecting the profitability threshold ratio:

• The price of the goods for one 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 changes up or down. Of particular importance is the analysis of all costs, which economists divide into fixed and variable. The first ones include:

• Depreciation for major facilities and equipment;
• rent;
• All utilities and payments;
• Salaries of employees of the company's management;
• Administrative costs for their maintenance.

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

• Salary of the entire workforce of the enterprise;
• Commissions for servicing accounts, loans or transfers;
• Expenses 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 return, analyze costs in all respects.

Any enterprise seeks to develop and increase capacity, 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 more often used, giving an idea of ​​what the profitability of a project is:

1. Methodology for calculating the net present value: it helps to determine the net profit from a new project;
2. Methodology for calculating the profitability index: necessary to obtain income per unit of costs;
3. The method of calculating the 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:

GNR = (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 costs in the case of project development at the expense of borrowed funds, loans or credits;
• To confirm the profitability and document 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. Its excess in real work will mean that a new enterprise or direction will be unprofitable.

1. Methodology for calculating the return on investment;
2. 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 investments is taken;
3. The accounting rate of return methodology that is used to short term projects. In this case, the profitability will be calculated by the formula:

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

NP - net profit from a new business project.

A full calculation in various 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 the profitability of the enterprise

Sometimes the analysis gives results that require serious management decisions. To determine how to increase profitability, it is necessary to understand the reasons for its fluctuation. To do this, we study the indicator for the reporting and previous period. Usually taken as the base last year or a quarter in which there was a high and stable revenue. The following is a comparison of the two coefficients in dynamics.

The profitability indicator may be affected by a change in the selling price or 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 the demand of buyers of goods, activity, breakdowns or downtime. Solving the problem of how to increase profitability and, it is necessary to use various ways profit increase:

1. To improve the quality of a product or service, its 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 at a more affordable price for the consumer. You can consider the option;
2. Improve the properties of their products, which will help attract new consumers and become a more competitive company in the market;
3. Develop a new active marketing policy for your business project, attract good management staff. Large enterprises often have an entire marketing department that deals with market analysis, new promotions and finding a profitable niche;
4. In various ways to reduce the cost in order to compete with a similar range. This should not be at the expense of the quality of the product!

The manager needs to find a certain balance among all methods in order to achieve sustainable positive result and keep the profitability of the enterprise at the proper level.

Any activity must be profitable. Negative indicators or even "going to zero" clearly indicate that something needs to be changed in the very processes of production and sales of products. However, this cannot be understood without a thorough analysis of the results. And this time we will talk about how to calculate the return on sales.

The concept of profitability of sales

First of all, let's find out what is the profitability of sales. According to the international definition, return on sales is the ratio of net profit to net (revenue) from all types of sales.

The formula by which profitability is calculated

• ROS (Return Of Sales)- in fact, the very profitability of sales. Measured in%.
• N.I. (Net Income)- net profit. Measured in c.u.
• NS (Net Sales)- proceeds (net) received from all types of sales. Measured in c.u.

What is the difference between NI and NS

NS (revenue) - all funds received by the enterprise for services or goods, excluding the cost of their acquisition, etc. This value is always positive. In turn, NI (net profit) can be both positive and negative. Profit is calculated as the difference between revenue and all the costs of obtaining it. In fact, NI is the profit that remains after paying all taxes, extra. payments (employee salaries, rent), etc.

Profitability ≠ markup: note for young entrepreneurs

Since understanding how to calculate return on sales is one of the main aspects of any company, it should be mentioned about typical delusion many young entrepreneurs. The stupidity of modern school textbooks is talked about at every turn. This problem has not bypassed the textbooks of economics. In books published in last years, often the concepts of profitability and margins are identified with each other. However, this approach is fundamentally wrong. Consider a banal example: the cost of the 1st unit of production is 10 USD. Mark-up - 5 c.u. (that is, the consumer can purchase the desired product for 15 USD). Let's say 100 units of a product were sold within a month. That is, the company's revenue amounted to 1500 USD. At the same time, the cost of salaries to employees, rent of premises and other costs amount to 2000 c.u. That is, the profit will be 1500-2000=-500 USD. In fact, the entrepreneur will go into negative. Thus, we come to the logical conclusion that margin and profitability are related concepts, however, by no means interchangeable.

How it works? We calculate the profitability of sales for the year

Let's return to our main topic - how to calculate the profitability of sales. For example, in 2001, the company's revenue from all sales amounted to 1.15 million USD, and net profit - 284 thousand USD. In 2002, the proceeds increased to 1.26 million cu, and net profit - up to 306 thousand. Let's look at an example of how the profitability of sales is calculated using the above formula:

• ROS2001= 284/1150 x 100% = 0.247 x 100% = 24.7%.
• ROS2002 = 306/1260 x 100% = 0, 243 x 100% = 24.3%.

We calculate the change in profitability

Now, based on these data, we can find out how the return on sales has changed over the year: Δ ROS = ROS2002 - ROS2001 = 24.3% - 24.7% = -0.4%. That is, in 2002 the profitability of sales decreased by 0.4%.

We train on our own

Analyze the profitability of sales of the same company for 2003, if the revenue was 1.34 million USD, and the net profit was 387 thousand dollars. Compare them to previous years. If you understand how to find the profitability of sales, you can easily complete this simple task!

Many individual entrepreneurs and small business leaders measure their business performance by a simple trading margin. Simply put, by purchasing a batch of goods for 100 r. per unit, and having sold at 150, they believe that they received a net profit of 50%.

Perhaps, to evaluate such ordinary resale operations, this indicator, which, by the way, is called the profitability of sales, can tell something about the return on invested capital, but can such a business be called serious. After all, one fine day, with a sharp drop in demand for the goods being sold or when purchasing its low-quality batch, the business will necessarily stop due to lack of working capital.

How to find out what share in the formation of profits have transportation costs and to what price should they be attributed - purchase or sale? What borrowed funds were involved and how did they find their reflection in the final result? What impact will interest on loans have on the future financial activity? What are the overhead and operating expenses and are they included in the formation of profit? How to calculate the profitability of production?

And such questions arise already during simple purchase and sale transactions. And how then to analyze the financial and economic activities of a serious trading or manufacturing company with a large volume of current operations, attracting investments and loans, investing in working capital and expanding production?

Why is calculation necessary?

An entrepreneur who wants to seriously run his business, successfully develop and expand it, must constantly and scrupulously conduct the most thorough analysis of economic performance, determine the factors that affect the increase or decrease in profits, and look for ways to overcome problems. For such an analysis, there are time-tested characteristics and methods for calculating the effectiveness of economic activity.

The main economic indicator characterizing the commercial success of an enterprise is is, of course, profit, or the excess of his income over his expenses. But the absolute value of profit says little about business performance. It is one thing: a million rubles earned by a tiny company of three people working in a small office occupying one room, and quite another - a large plant or factory with multi-million dollar fixed assets. In the first case, we can talk about superprofits, in the second - about slipping to the threshold of unprofitability.

That is why the main indicator of economic efficiency is not the absolute value of net profit, but its ratio to various types costs involved in its creation. They're called profitability ratios and allow you to identify both factors that both increasing profitability and hindering it. These characteristics are the main tools for economic analysis of economic activity, which allow assessing the investment attractiveness and creditworthiness of the company.

When issuing a loan, any bank will first of all study the company's profitability indicators, and an investor who is going to finance a new project will study the profitability of a business idea, that is, both will be interested in the possibility of a quick return on their investments and the risks associated with it. Many business counterparties will also invariably be interested in these characteristics to determine the reliability of a business partnership.

In the most general sense, profitability ratios make it possible to see in numerical terms the share of profit received by the enterprise over a certain period of time, in each ruble spent to extract it. To put it simply, if a company's profitability is, say, 20%, then this means that in every ruble it earns, the share of net profit is 20 kopecks.

Formulas and calculation examples

For trade enterprises, both retail and wholesale, the most important parameter showing the share of profit in total sales is:

Return on sales = Net profit / Revenue.
Companies engaged in the production of any product should take into account the effectiveness of financial investments in the production process using an indicator such as:

Profitability of production = Profit from sales / Production costs.
One of the most important coefficients showing the efficiency of the use of working capital and expressing the measure of the company's profitability for each ruble invested in the formation of its assets is:

Return on assets = Net profit / Assets.

In all these and subsequent formulas:

1. Revenue from sales- the difference between revenue and operating costs, i.e. profit before tax.
2. Production costs- the sum of the cost of fixed assets and working capital.
3. Net profit- funds remaining with the company from the income received, after deducting all costs, production costs, taxes, interest on loans.
4. Revenue- the total amount of cash received as a result of economic activity from the sale of products, the sale of goods or services, investments, sales valuable papers, lending, etc.
5. Assets- the total value of the property of the company, cash, inventories, receivables, fixed assets.
6. Net assets- the difference between the value of all assets and the amount of debt, or liabilities. The final value of the third section of the balance sheet.

What affects this indicator?

As can be seen from the calculation, despite the growth in the company's net profit, an increase in investments in production and working capital, its profitability is falling. The reason for this in this case is the growth of non-current assets. And it’s good if it is due to long-term investments, which in the near future will begin to bring stable income. Or the acquisition of intangible assets, for example, licenses for the production of new types of products, which will soon begin to provide additional profit.

If this decrease is associated with an unreasonable increase in fixed assets that are not involved in production, then this indicator will continue to reduce the profitability of the company's assets. Or in the case when the analysis shows an increase in the cost of repairing the means of production - this is a signal that it is necessary to replace the equipment.

In general, the profitability of an enterprise is influenced by many factors, both internal and external:

1. External, subjective: market conditions, inflation rate, government tax policy, competitive pressure.
2. Internal, or subjective: the volume of assets, production assets, turnover; technical equipment, labor productivity and many others.

All of them operate either directly or indirectly, affecting both sales and costs. A rigorous analysis of the impact of each of them on the profitability of the enterprise will increase it by improving production, stimulating product sales, increasing efficiency and reducing unjustified costs.

Analysis of profitability by links

In all cases, increasing profitability and reducing costs contribute to increasing profitability. The simplest, but also the most inefficient way to increase it is to increase the selling price of products in order to extract more profit. Inefficient, because excessively inflated prices may result not in an increase in sales, but in its decrease.

In the conditions of maintaining the average market competitive price for products, there is only one way to increase profitability - reducing unjustified costs at all stages of the production chain and the sale of the finished product. Unjustified in this case will be variable costs that are not directly involved in the formation of the cost of production and the formation of its price, but occasionally reduce the profit from its sale.

It is for this analysis that there are separate profitability ratios, showing the impact of each resource in creating profit. For a deeper analysis, you can use, for example, such production efficiency factors as:

1. Profitability of fixed production assets = Net profit / Cost of production assets.
2. Return on current assets = Net profit / current assets.

Another of the most important ratios showing the efficiency and turnover of investments in the company's equity capital is calculated using the DuPont equation: return on equity = Net income / Net assets.

It is the product of three coefficients - Net profit margin * Resource efficiency * Capitalization, where:

1. Net profit margin = Net profit / Revenue. The company's ability to reinvest in increasing working capital.
2. Resource return = Revenue / Assets. Shows the effectiveness of asset management by the company or the turnover of each ruble invested in assets over a certain period of time.
3. Capitalization = Assets / Net assets. Allows you to evaluate the effectiveness of borrowing or lending.

As an additional parameter, when considering the efficiency ratio of debt capital in relation to equity, a simple formula is often used: leverage = Borrowed funds / Net assets.

In contrast to Return on Assets, Return on Equity shows the specific ratio of borrowed funds in increasing the company's profitability. It shows the effectiveness and attractiveness of lending to a given enterprise for investors or banks. In some cases, for the management of the enterprise, he can show that even if there is enough equity capital, it is better to attract additional financing from debt capital, if this increases the efficiency of equity capital.

Among the many coefficients, the one showing the break-even point of the enterprise, below which the total costs will begin to exceed the total income, plays a significant role: Profitability threshold \u003d Fixed Costs / (Revenue - Variable Costs). It can be calculated both for the company as a whole and for certain types products.

In addition to these main indicators, other profitability ratios can be used to analyze the economic activity of an enterprise: personnel, contracting services, investments, trade margins, total and net assets, and others.

It must be said that excessively inflated profitability values ​​show the company's greater efficiency, but speak of the high risks that accompany its commercial activities. So, an enterprise that has received a large loan will also have a high return on assets, but if it is used inefficiently, it will very soon reach the threshold of profitability and go negative. Each type of business has its own optimal indicators that indicate its stable development.

Generally these values ​​should not exceed 30~40%. In addition, they may wear seasonal changes, in case, for example, tourism business. In certain periods of the year, associated with the period of tax deductions to the budget, they may decrease, and for agricultural production - increase. That is why the results of economic activity should be evaluated both for short-term periods and averaged over long periods.

To analyze the performance of an enterprise, economists and accountants use quite a lot of different indicators. Among them are those that illustrate overall results business activities of the company, others affect narrower areas. Often, to form an opinion about the success of an organization, it is enough to study it. general level profitability. The formula, as well as its components and the meaning of numerical indicators will be discussed in this article.

How is profitability calculated?

The main goal of every entrepreneur, manager or leader is to achieve the highest possible results in the implementation of production, trade, consulting or other activities. Profit can be safely considered evidence of success. This indicator is calculated by subtracting from the total income (or the amount of revenue) the expenses incurred by the enterprise.

The main indicator, which in percentage terms shows the degree of efficiency in the use of resources available to the enterprise (material, labor, financial), is the overall profitability. The formula for its calculation is extremely simple. This is the ratio of the received net profit (NP) to the average annual cost of fixed assets of production (PF) and normalized working capital (NOS): OR \u003d NP / (OF + NOS) x 100%.

In other words, this indicator reflects the actual increase in capital invested in economic activity. It is equal to the ratio of profit to assets.

Profitable and unprofitable enterprise?

When the total profitability (the formula allows you to calculate which is always above zero) is greater than one, then the profit exceeds the costs. The company is profitable. It brings in income. Otherwise, the company is called unprofitable. Negative indicator can only be indicated conditionally, if we take into account the concept of negative profit (loss).

Factors and profitability

The amount of profit and, accordingly, the level of profitability is influenced by numerous factors. They are external and internal. The first group includes those that do not depend in any way on the efforts made by the staff. This category includes the dynamics of the cost of materials, changes in the price of products and depreciation rates, and an increase in transport tariffs. For the analysis of economic activity, these nuances are extremely important. They affect the value of generalizing indicators across the entire enterprise.

Sales volume, cost and overall profitability (the formula of which is given above) inevitably depend on whether there are changes in the structure of the product range. As for internal factors, they reflect the level of labor investment of the enterprise's employees, as well as how efficiently and competently the management manages production resources.

Universality of the indicator

The overall profitability ratio, the formula of which is the same for all business entities, is becoming a universal indicator. Given that it is relative, and not absolute (like profit, for example), it can be used to compare the performance of several completely different enterprises. Let's talk about them in more detail.

Absolute indicators (revenue, do not allow for a correct comparison, since the result obtained will not be reliable. It is quite possible that the efficiency and stability of an organization with a small sales volume will be higher than that of a corporate giant. By its value, the general (the formula allows you to calculate the relative indicator) is equated to the coefficient useful action(efficiency). But that's not all. In addition to the general indicator, they also calculate the return on capital, production, sales, personnel, investments, etc.

Overall Profitability: Balance Formula

Most are calculated based on balance sheet data. In that accounting document contains information on all key categories: assets, liabilities, equity of the organization. The form is produced twice a year, which allows economists to analyze data at the beginning and end of the period. Separate types of profitability are calculated taking into account the following indicators:

• Assets (current and non-current).
• The amount of own capital.
• The volume of investments and others.

However, it is extremely wrong to calculate based on only one of the values. Correct analysis implies the use of average indicators. To get them, find the average arithmetic value: from the indicator at the beginning and end of the current period. The numerator of the formula is net profit. And in the denominator - the one you want to calculate. But that's not all. The overall profitability (the formula will contain the numbers indicated in the balance sheet) is calculated after the document is drawn up.

What does the term "return on equity" mean?

They name the financial expression of the requirements of the founders to the company. Both for them and for investors, indicators characterizing the capital of the company are extremely important. Pay attention to the calculation of the overall profitability. The formula allows you to get a generalized concept of the state of the organization, its effectiveness. Based on the data received, investors make decisions that sometimes turn out to be vital for the enterprise. Being directly interested in its success and development, they invest their own or borrowed funds and expect to share future profits with the owner.

How is the total return on capital determined? The formula for calculation is as follows: the ratio of the net profit (NP) calculated for a certain period to the average annual value of the cost of equity (CK): RR = (NP / SK) x 100%.

The data obtained as a result of calculations are compared with similar indicators of previous periods. Economists also use these numbers to compare the performance of an enterprise with other companies in a particular industry. By observing an increase in the overall return on capital, they conclude that financial resources are being used correctly. Obvious success in conducting business and economic activities attracts the attention of investors. And it opens the way for the business owner to further develop his business.

In the system of performance indicators of enterprises important place belongs to profitability.

Profitability is a use of funds in which the organization not only covers its costs with income, but also makes a profit.

Yield, i.e. enterprise profitability, can be assessed using both absolute and relative indicators. Absolute indicators express profit and are measured in value terms, i.e. in rubles. Relative indicators characterize profitability and are measured as a percentage or in the form of coefficients. Profitability indicators are much less influenced than profits, since they are expressed by various ratios of profit and advanced funds(capital), or profit and expenses incurred(costs).

In the analysis, the calculated profitability indicators should be compared with the planned ones, with the corresponding indicators of previous periods, as well as with data from other organizations.

Return on assets

The most important indicator here is the return on assets (in other words, the return on property). This indicator can be determined by the following formula:

Return on assets- this is the profit remaining at the disposal of the enterprise, divided by the average value of assets; The result is multiplied by 100%.

Return on assets = (net profit / average annual value of assets) * 100%

This indicator characterizes the profit received by the enterprise from each ruble advanced for the formation of assets. The return on assets expresses the measure of profitability in a given period. Let us illustrate the procedure for studying the rate of return on assets according to the analyzed organization.

As can be seen from the table, the actual level of return on assets exceeded the planned level by 0.16 points. Two factors had a direct impact on this:

• above-planned increase in net profit in the amount of 124 thousand rubles. increased the level of return on assets by: 124 / 21620 * 100% = + 0.57 points;
• overplanned increase in the assets of the enterprise in the amount of 993 thousand rubles. reduced the level of return on assets by: + 0.16 - (+ 0.57) = - 0.41 points.

The total influence of the two factors (balance of factors) is: +0.57+(-0.41) =+0.16.

So, the increase in the level of return on assets in comparison with the plan took place solely due to an increase in the amount of the net profit of the enterprise. At the same time, the rise in the average cost, others, also lowered the level return on assets.

For analytical purposes, in addition to indicators of profitability of the entire set of assets, indicators of profitability of fixed assets (funds) and profitability of working capital (assets) are also determined.

The indicator of profitability of fixed production assets (otherwise called the indicator of capital profitability) is represented as the following formula:

The profit remaining at the disposal of the enterprise multiplied by 100% and divided by average cost fixed production assets.

The profit remaining at the disposal of the enterprise multiplied by 100% and divided by the average value of current assets.

ROI

The indicator of return on invested capital (return on investment) expresses the effectiveness of the use of funds invested in the development of this organization. Return on investment is expressed by the following formula:

Profit (before income tax) 100% divided by the currency (total) of the balance sheet minus the amount of short-term liabilities (total of the fifth section of the balance sheet liabilities).

Return on equity

In order to receive an increment due to the use of a loan, it is necessary that the return on assets minus interest for using the loan be greater than zero. In this situation, the economic effect obtained as a result of using the loan will exceed the costs of attracting borrowed sources of funds, that is, the interest for using the loan.

There is also such a thing as financial leverage, representing specific gravity(share) of borrowed sources of funds in the total amount of financial sources of formation of the organization's property.

The ratio of the sources of formation of the organization's assets will be optimal if it provides the maximum increase in the return on equity in combination with an acceptable amount of financial risk.

In some cases, it is advisable for an enterprise to receive loans even in conditions where there is a sufficient amount of equity capital, since the return on equity increases due to the fact that the effect of investing additional funds can be much higher than interest rate for using the loan.

The creditors of this enterprise, as well as its owners (shareholders), expect to receive certain amounts of income from the provision of funds from this enterprise. From the point of view of creditors, the profitability indicator (price) of borrowed funds will be expressed by the following formula:

The fee for using borrowed funds (this is the profit for lenders) multiplied by 100% divided by the amount of long-term and short-term borrowed funds.

Return on total capital investment

A generalizing indicator expressing the efficiency of using the total amount of capital available to the enterprise is return on total capital investments.

This indicator can be determined by the formula:

The costs associated with attracting borrowed sources of funds plus the profit remaining at the disposal of the enterprise multiplied by 100% divided by the amount of total capital employed (balance sheet currency).

Product profitability

The profitability of products (profitability of production activities) can be expressed by the formula:

Profit remaining at the disposal of the enterprise multiplied by 100% divided by the total cost of goods sold.

In the numerator of this formula, the indicator of profit from the sale of products can also be used. This formula shows how much profit the company has from each ruble spent on the production and sale of products. This indicator of profitability can be determined both as a whole for this organization, and for its individual divisions, as well as for individual types of products.

In some cases, the profitability of products can be calculated as the ratio of the profit remaining at the disposal of the enterprise (profit from the sale of products) to the amount of proceeds from the sale of products.

• from changes in the structure of products sold. Increase in specific gravity over profitable types products in the total amount of production contributes to an increase in the level of profitability of products.;
• a change in the cost of production has an inverse effect on the level of profitability of products;
• change in the average level of selling prices. This factor has a direct impact on the level of product profitability.

Profitability of sales

One of the most common measures of profitability is the return on sales. This indicator is determined by the following formula:

Multiply the profit from the sale of products (works, services) by 100% and divide by the proceeds from the sale of products (works, services).

Profitability of sales characterizes the share of profit in the composition of the proceeds from the sale of products. This indicator is also called the rate of return.

If the profitability of sales tends to decrease, then this indicates a decrease in the competitiveness of products in the market, as it indicates a reduction in demand for products.

Consider the order of factor analysis of the return on sales indicator. Assuming that the product structure has remained unchanged, we determine the impact on the profitability of sales of two factors:

• change in the price of products;
• change in the cost of production.

Let's denote the profitability of sales of the base and reporting period, respectively, as and .

Then we get the following formulas expressing the profitability of sales:

Having presented the profit as the difference between the proceeds from the sale of products and its cost, we obtained the same formulas in a transformed form:

Legend:

∆K— change (increment) of profitability of sales for the analyzed period.

Using the method (method) of chain substitutions, let us determine in a generalized form the influence of the first factor - changes in the price of products - on the indicator of profitability of sales.

Then we calculate the impact on the profitability of sales of the second factor - changes in the cost of production.

where ∆K N- change in profitability due to changes in the price of products;

∆K S- change in profitability due to changes. The total impact of the two factors (balance of factors) is equal to the change in profitability compared to its base value:

∆K = ∆K N + ∆K S,

So, increasing the profitability of sales is achieved by increasing prices for products sold, as well as reducing the cost of products sold. If the share of more cost-effective types of products increases in the structure of products sold, this circumstance also increases the level of profitability of sales.

To increase the level of profitability of sales, the organization must focus on changes in market conditions, monitor changes in product prices, constantly monitor the level of costs for production and sale of products, and also implement a flexible and reasonable assortment policy in the field of production and sale of products.