Product profitability shows the result of current costs. Formula for product profitability on the balance sheet Product profitability

The basis for the profitability of each production has always been the following components:
- sales of these products;
— release efficiency.

Moreover, this profitability does not depend on the scope of the current company. In fact, all profitability will be determined strictly by the ratio of profits to their costs. The profit that the company received as a result of sales. Taking into account the very costs that existed at the time of release of the finished product. There is a special formula and only with the help of it can one really calculate and evaluate the current state for a particular company.

How to calculate?

It can be safely noted that monitoring the profitability of an enterprise and constantly monitoring its current state is considered to be a generally accepted practice all over the world. It is no secret that successful development cannot be based only on intuition and a simple sense of understanding that some projects are ready to make a profit. It is always important to carry out analysis, and not just analyze positions in words and predict consequences, but apply mathematics. Special mathematical analysis helps to objectively assess the entire state of the market, and use special methods to calculate the use of the product (project) and its payback period.

Only when using real data is it possible to make calculations about the real profitability of the project. The accounting documentation of the enterprise itself, plus quarterly reports, helps to obtain real data as a basis.

Calculation of profitability is especially interesting for such persons:

business owners (they simply need to constantly evaluate the correctness of the “laid course”);
creditors (thus they are accustomed to monitoring the economic situation in the current enterprise).

Only the absolute value determines the profitability of a given enterprise and therefore such a value can be quite easily presented in the accounting report (in the form of cash).

It is the profitability indicators that deserve special explanation at this point - this is a special ratio of absolute values that can be expressed as a percentage of each other. But relative indicators are not so demonstrative in this case. In general, the profitability ratio is ready to show exactly how many units of profit a given businessman can receive from his units of cost for producing this product. It is customary to prescribe the profitability coefficient as a fraction, when the numerator shows profit (it will be earned only directly from the sale of goods), but the denominator of the current fraction contains a cost indicator. After this, the resulting indicator will need to be multiplied by 100. This is how the proportion is ready to demonstrate the full indicator in relation to profit to total cost.

But it’s unlikely that one single calculation is ready to fully reflect the entire state of the current enterprise. What is needed is an integrated approach, as a result of which such important points as:

the difference between planned and actual profitability;
the data obtained will necessarily be compared with the data of some competing companies;
analysis is carried out for the company regarding its product rating based on the last few years.

There are two concepts that are considered to be basic for finding the profitability of products from an enterprise.

Quite often, an indicator is determined for a specific type of product, and for this purpose it is also necessary to select sales from the entire general structure.

Analysts quite often use this type of concept to make forecasts.

The next concept for calculating profitability is as follows: an analysis of the global situation is carried out. During the reporting period, a study will be conducted on the total amounts during the entire reporting period.

Production profitability– it is always a percentage value. This is precisely what makes it possible to simplify the use of this indicator for complex analysis over a long-term period.
Profitability of products sold– this is an indicator that reflects the efficiency of selling a given product based on the ratio of income and costs.

Formula for determining the profitability of products sold

In order to calculate a known profitability indicator from the sales indicator of a certain type of product, it is necessary to apply the net income received or profit on sales.

For this purpose, two types of cost can easily be used:

complete (it includes all the costs of commerce);
production (it contains only costs for production).

List of formulas that can be easily used to calculate profitability:

Profitability for total profit on sales and at full cost = PR divided by TC and multiplied by 100 percent (where PR is an indicator for total profit, and TC is already an indicator for total costs for production).
Profitability is based on profit from sales and from cost strictly based on direct production costs = PR divided by TC of production. (where PR is an indicator for total profit, and TC is already an indicator for total costs for production, but already production ones).
Profitability in terms of net profit and subject to full costs in the cost price = PE divided by TC (where PE is an indicator of only net profit, TC is already an indicator of total costs for production).
Profitability of products, which was calculated subject to net profit and cost of production of goods = PE divided by TCproduction. (where PE is an indicator of net profit only, TC is already an indicator of total costs for production, but already production).

Profit can be found in financial results- this will be a special value in line 050. You can independently calculate such profit using a special formula: PR = TR-TS (where PR is the profit itself based on sales, TR is strictly sales revenue, TC is the total cost of sales release).

Revenue is often found in the same statements, but under line number 010.
Therefore, the full cost is calculated using the formula: TC = line 020 plus line 030 plus line 040. In this formula, lines 020, 030 and line 040 always reflect production costs, reflect commerce and also administration.

Net profit (line 190) is equal to sales profit - other costs - other income - tax payment on profit.

Also, when making calculations, be sure to take into account the following factors:

factors that are ready to influence the forecast of profitability of a given enterprise;
not always ready to reduce the cost of goods;
It is worth giving preference to those types where the profitability is the highest.

It is worth remembering that standard profitability is usually calculated only in dynamics, over several months at once. The country’s tax system also actively influences the calculations.

Hello! Today we’ll talk about profitability, what it is and how to calculate it. aimed at making a profit. The correct operation and effectiveness of the management methods used can be assessed using certain parameters. One of the most optimal and informative is the profitability of the enterprise. For any entrepreneur, understanding this economic indicator is an opportunity to assess the correctness of resource consumption in 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 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: the larger the 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 (hired workers, personnel);
Economic;
Financial;
Natural.

Their rational and correct operation should 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 that influence profitability to varying degrees. 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 geographic location, proximity to sources of raw materials or consumer clients. The situation on the stock market and exchange rate fluctuations have a huge impact.

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 to determine the exact amount of income received under the influence of 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%

Typically, when conducting such financial analysis, a three-factor or five-factor model is used. 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 various 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 is the total cost of all current and non-current assets, production facilities and resources. It is taken from the balance sheet and its annexes.

For the calculation, you will need 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 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 is the average value by type of asset for the same time.

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 of labor that are directly or indirectly involved 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 the economic activity of a business project is 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, different types of profit can be used. 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 the 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. Of particular importance is the analysis of all expenses, which economists divide into fixed 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, which 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 for a new project. The internal rate of return is most often calculated using the formula:

INR = (current net worth / current initial investment amount) * 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 profitability, it is necessary to use various ways to increase profits:

Improve the quality of products or services and their packaging. This can be achieved by modernizing and re-equipping its production facilities. 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.

Unlike profit, which shows the absolute effect of activity, there is a relative indicator of the efficiency of an enterprise - profitability. In general, it is calculated as the ratio of profits to costs and is expressed as a percentage.

The following types of profitability are distinguished:

1) profitability of production (production assets)(R p), calculated by the formula:

R p = P in / (GPP + NOS),

where P in is the total (gross) profit for the year (or other period);

GPP - average annual cost of fixed production assets;

NOS is the average annual balance of standardized working capital.

2) return on equity(R s.k), which is characterized by the size of the authorized capital (share capital), it interests all shareholders, because determines the upper limit of dividends:

R s.k = P h / K s,

where P h - net profit (including interest payments on the loan);

Kc is equity capital, the value of which is taken according to the balance sheet and is equal to the amount of assets minus debt obligations.

3) return on permanent capital(R p.k) - reflects the efficiency of using long-term (permanent) capital in the organization’s activities (both own and borrowed):

R p.k = P h / K p,

where K p is permanent capital.

4) return on total assets(P a) - characterizes the efficiency of using all available assets of the enterprise:

R a = P h / K a,

where K a is the average amount of assets on the enterprise’s balance sheet;

5) product profitability(P pr) characterizes the cost efficiency of its production and sales:

R pr = P r / S r,

where Pr is profit from sales of products (works, services);

Ср - full cost of goods sold;

6) profitability of certain types of products(R v.pr):

R v.pr = P unit / S unit,

where P ed - profit per unit of production;

C unit - the total cost of a unit of a certain type of product;

7) profitability of sales (sales or turnover)Р р - shows the share of profit per one monetary unit of sales (cost of products sold):

P r = P r /V r,

where P r – profit from sales;

V r – sales revenue.

Every aspiring entrepreneur is incredibly happy when he receives the first shoots of his work, and this is quite fair. - a difficult path that requires great expenses in every sense of the word. Why do some of them suffer subsequent disappointment? After all, the idea is great, the products are in demand, the equipment is set up, and the staff has already learned how to work? The problem is that production costs constantly exceeded sales profits, and the initial capital melted like an iceberg in Africa.

The main result of the activity of any enterprise was and remains. Achieving this indicator depends on many factors:

Income from sales of manufactured products (or services of the enterprise).
Production costs: utility bills, payments and interest on loans, tax obligations, materials and equipment, payments to employees and subcontractors, etc.

The profitability of an enterprise allows you to evaluate the effectiveness of its activities and consists of the total result of profitability:

Sales (product sales), if the organization produces goods in an assortment, then it is necessary to calculate the profitability for each type of product.
, here we mean all the company’s property (transport, real estate, equipment, etc.) without taking into account borrowed funds and debt obligations.
Own capital.
Investments and loans.

In addition to the production and sale of products, a company may be engaged in any other work: providing services, investing, or being a borrower. Any of these operations will generate revenue or increase costs, which in turn affect the profitability of the organization. Therefore, it is very important to evaluate each of these components separately, which will allow you to identify weaknesses and correct the situation in a timely manner.

Sales profitability depends on many factors:

commodity unit, production costs
Buyer activity and demand for products
Competitiveness, quality and attractiveness of the product for the consumer
Pricing policy and market value of a commodity unit

This value is calculated as a percentage and shows how much profit the organization received over a certain period of time from each ruble spent on the production and sale of a particular product. Also, this financial indicator is an assessment of the effective management of the enterprise, because making a profit directly depends on the right decisions of management.

Calculation formula and main indicators

So, in the process of its activities, an enterprise expends resources, and as a result makes a profit. The ratio of profits to costs is the profitability ratio of the enterprise. As for the profitability of products sold (sales), it is determined by the following formula:

Where RRP is the return on sales ratio, PP is the profit from sales, SBS is the cost of goods sold.

The correctness and accuracy of the calculations lies in what types of profit and costs are included in them. It is also necessary to clearly define the period for which the calculation will be made. If profits are calculated for one month and costs for another, then the result obtained will be incorrect and useless.

It will not be entirely correct to use the net profit of an enterprise in calculations if the company receives income from several types of activities, and not each of them is related to the sale of products. In this case, you need to take as a basis only profit from sales, which is easy to find in. If you need to determine the profitability ratio of sales of a certain product group or type, you will have to calculate sales revenue for the selected period of time specifically for a specific product category.

Now you need to decide on the cost. This indicator has two main forms: production and complete.

Production costs consist only of the costs of manufacturing products (raw materials, materials and other resources), but do not include sales costs. Operating with this figure is also not entirely correct, since the result obtained will be overestimated and not relevant enough. The calculations should be based on the full cost, which consists of the costs of both production and sales.

The accuracy and reliability of the result will depend on the choice of the correct main indicators, without which the analysis and further calculations lose their meaning.

Calculation examples and conclusions

For a more complete perception of this information, you should consider a visual one: the company produces chocolate and candies. Sales revenue for the selected period amounted to 560,000 rubles, the total cost, including all expenses, was 243,000 rubles. It is necessary to calculate the profitability of products sold.

First, you should determine the profit from sales; to do this, you should subtract costs from revenue: 560,000-243,000 = 317,000 rubles. Next, we calculate the return on sales ratio: 317000/243000 = 1.3045, round the result to hundredths, it turns out 1.30.

To determine the amount of profit from each ruble for products sold, this is multiplied by 100, 1.3*100=130 (kopecks). It turns out that every ruble spent brings 1 ruble 30 kopecks to the company’s profit. This can be considered a very good result.

Now an example of a more detailed calculation. The company produces chocolate bars, boxed and weighed chocolates.

Profitability for each product group for each ruble spent, respectively: 0.86 rubles, -0.34 rubles, 0.78 rubles. It turns out that the production of boxed sweets is unprofitable for the enterprise and should either be stopped or revised: increase the market value, reduce costs, etc. Sometimes the company's management decides to carry out promotions, that is, costs increase for a certain time, but subsequently there is a positive trend.

The profitability threshold is considered to be zero, when costs are covered, but the enterprise does not make a profit. This trend is typical for new firms whose products are not yet in high demand, investments have not yet paid off and there is a constant need for advertising costs. If this indicator remains zero or negative for a long time, the situation should be analyzed and weaknesses identified.

Sales profitability analysis

There is no regulatory framework for the profitability ratio of products sold. This financial indicator is determined by comparison:

With sales of competing companies
With previous indicators and dynamics in general
Compliance with previously drawn up forecasts and plans

Competitiveness has always been the key to a successful business. It is almost impossible to achieve good results in the modern market without looking at competitors. For this purpose, regular monitoring of certain product groups is carried out. Basic methods of maintaining competitiveness:

Flexible pricing policy. An exorbitantly inflated price leads to a decrease in consumer demand, and an understated price will not bring profit. It is very important to find a middle ground here in order to stay afloat among competitors.
Constant control of product quality. Without paying attention to this issue, you can lose all your clients and customers.
The attractiveness of the product for the buyer. All means are good here: colorful practical packaging, high-quality advertising, etc. Many companies provide retail outlets with equipment for their products in order to present them in the most favorable light to the consumer.

A rather unstable financial indicator that needs to be constantly monitored. The easiest way to analyze the situation is using graphs or a table where data is entered for each reporting period; this will allow you to quickly and clearly track the dynamics of profitability.

If this financial indicator is prone to decline and does not correspond to pre-developed plans, it is necessary to identify the reasons for this trend and take measures to eliminate them. The methods can be very diverse, but they have two main directions: reduce costs and increase profits.

Profitability of products sold is the main indicator that evaluates the company's activities. This aspect is important both for the owner of the enterprise and for investors, creditors and business partners, so it must be monitored constantly and very carefully.

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The desired result of every enterprise is profit. However, profit in absolute terms (in rubles, thousands or millions) is just a number on the income statement. For the owner or investor, it is, of course, important, but not informative enough. In order to understand how hard this profit was obtained, there are relative indicators of profitability, called profitability indicators. One of them is production profitability.

Profitability of production correlates the amount of profit received with the amount of funds that made it possible to obtain it, shows the amount of profit per 1 ruble. spent production assets. The fewer funds are used to obtain a certain amount of profit, the higher the profitability of production, and therefore the higher the efficiency of the company.

Read our articles about other profitability indicators:

“Determining return on assets (balance sheet formula)”
“Determining return on equity (formula)”

Production profitability formula

Profitability of production is the ratio of the total amount of profit (balance sheet profit) to the average annual cost of fixed and working capital.

The formula for calculating production profitability is as follows:

Rproduct = Pr / (OF + ObS) × 100,

Rproduct—production profitability;

PF - average cost of fixed production assets for the billing period;

OBC is the average cost of working capital.

Where to get the numbers for calculations

Information for calculating production profitability is taken partly from financial statements and partly from accounting analytics.

Thus, we obtain the amount of balance sheet profit from the statement of financial results - from line 2300 “Profit (loss) before tax” of Form 2.

Read more about this report in the article “Filling out Form 2 of the balance sheet (sample)” .

Data for the denominator of the fraction will most likely have to be looked for in analytical accounting registers. It is unlikely to be possible to take figures from the balance sheet. For example, because it reflects aggregate data on the enterprise’s fixed assets, and to calculate the profitability of production, the balances of production assets are needed. This means that detailed information about the OS is needed.

Production profitability, product profitability and sales profitability - is there a difference?

Of course there is. These are separate types of profitability, three independent indicators. It has already been said above that production profitability shows the share of profit per 1 ruble. spent production assets.

In turn, product profitability shows the amount of profit per 1 ruble. cost (full or production). It is calculated using the formula:

Rpr = Pr / Ss × 100,

where: Rpr - product profitability;

Pr - profit;

CC - cost price.

As for the profitability of sales (it is also called total profitability), it carries information about the amount of profit per 1 ruble. revenue. It is calculated using the formula:

ROS = Pr / Op × 100%,

where: ROS - return on sales;

Pr - profit;

Op - sales volume or revenue.

As you can see, the indicators really differ both in meaning and in calculation. And they should not be confused.

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