Shows ROI as a percentage. Return on Sales (ROS). Formula. Calculation based on the example of JSC “Aeroflot”. Increase in costs and decrease in revenue

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There are several options for determining the return on sales (ROS, Return on Sales) - one of critical indicators for the economic analysis of activities. And in this article, we will talk about various formulas for calculating ROI.

In this article, you will learn:

EBIT formula
Balance Formula
Gross margin formula
What does the result obtained according to the formula in percentage indicate / li\u003e
What if the product ROI showed a drop

The classic formula for calculating ROI

Most often, to determine the profitability and efficiency ratio, they turn to the formula for the return on sales by net profit, considering it as the ratio of the company's net profit (PP) to sales revenue (TR) for the same period:

NPM \u003d NP / TR.

The numbers for the numerator and denominator are also calculated using separate formulas. Revenue is defined as the product of the price (P, or Price) and the volume of sales, the number of units sold (Q, Quantity):

It is important to note that in order to include the result in the profit margin formula from TR, you will need to subtract the indirect taxes paid in the analyzed period.

By calculating the revenue, you can highlight the company's net profit. To do this, all kinds of taxes (N), expenses (PrR), the cost of goods (TC, or Total Cost) are deducted from the proceeds and other incomes (PrD) are added:

CP \u003d TR-TC-PrR + PrD-N.

The company receives other expenses and income as a result of side activities, for example, trading in shares and securities, the difference from currency exchange, participation in the work of other organizations and the resulting benefits.

To determine the level of profitability of sales the formula may include instead of the net profit value following indicators:

profit before tax and before interest (EBIT);
operating profit from core activities;
the marginal profitability of the enterprise (or Gross Margin - gross margin).

The choice between these values \u200b\u200bis due to the tax burden, the available sales data and the purposes of the calculation.

For example, the analysis can be aimed at investigating the effectiveness different types main activity in the field of production and sale, or the study of individual goods and their groups. In this case, it is recommended to determine the profitability of sales using the formula with gross margin, since calculating the net profit will require the distribution of costs for each type of product, and this is a rather time-consuming task with indefinite utility.

Allocating income tax is also not an easy job, so for deep economic analysis in the NPM formula, instead of NP, you can use those parameters that will be easier to determine. Justified labor costs in this case will be the best solution.

EBIT Profitability Formula

To determine operating profitability, indicators of operating profit, EBIT, profitability of sales and revenue (TR, or Total Revenue) can be used. At the same time, it is important not to confuse the concepts of operating and profit before interest and taxes (Earnings Before Interest and Taxes).

ROS \u003d EBIT / TR -this is a formula for profitability of sales using the variable EBIT, which is determined in accordance with Russian accounting standards as follows:

EBIT \u003d line 2300 "Profit (loss) before tax" + line 2330 "Interest payable".

Profit without deducting taxes and interest in fact occupies an intermediate position between net and gross profit.

Formula of return on sales by balance

The calculation of the efficiency and profitability of sales can also be performed using the indicators of the balance sheet of the enterprise. In this case, profitability is obtained as a ratio, where the numerator contains an indicator of loss or profitability of sales (for example, in the company's balance sheet in form No. 1), and in the denominator, revenue (for example, taken in form No. 2 or information about financial results work). So we get a list of interchangeable formulas:

RP \u003d profit (loss) from sales / revenue (net) from sales,

RP \u003d line 050 / line 010 f. # 2,

RP \u003d line 2200 / line 2110.

Gross profit margin formula

The gross profit margin (or in English terminology - Gross Profit Margin, GPM) is calculated as a ratio, where the numerator is the value of gross profit (GP), and the denominator is the revenue (TR):

GPM \u003d VP / TR.

The IP value is usually calculated for reporting, therefore it is either taken from the documents or determined independently. Gross profit in trade is what remains of revenue when the Total Cost of the product is deducted from it:

VP \u003d TR-TC.

Revenue is equal to the product of the price and the number of units sold ( TR \u003d P * Q). Thus, gross profit can be calculated using the following formula:

VP \u003d P * Q-TC.

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What does the result obtained according to the formula for profitability of sales as a percentage indicate?

As mentioned at the beginning of the article, ROS is a measure of how much profit a company makes from each individual monetary unit of revenue. In other words, profitability tells us about the effectiveness of sales, about how much money the company actually earns from each ruble received from the client.

To assess how high the profitability is, it would be logical to rely on the normative indicators for the market. However, it is not possible to determine them. So senior management is faced with the challenge of analyzing their industry and competitors to derive their own standards and acceptable fluctuations in results, calculated using the profitability formula.

If you are analyzing the profitability of sales for the company as a whole

In comparison with competing enterprises, an obvious rule is unambiguously working: the lower the profitability ratio (that is, the lower the percentage of profit in each earned ruble), the weaker your company works against the background of others. After all, this suggests that the proceeds, in the main, cover expenses and do not generate income.

Poor profitability indicators may indicate an unsuccessful pricing policy, a wrong strategy in the market (for example, when an enterprise attracts attention by dumping). If the ratio of return on sales according to the formula according to the balance when summing up the results is too small or falls each time, then it is worth thinking about the marginality of the product or about reducing the cost of it.

If you are analyzing ROI for pricing purposes

The calculation of the profitability of sales by a formula based on balance or other indicators is available not only for analyzing the company at the top level, but also for studying the effectiveness of individual areas and making reasonable decisions.

For example, an analysis of the profitability of a product can suggest the direction of a pricing policy. It is also worth noting how the ROS variable is interconnected with the scaling of sales: overhead costs are redistributed to everyone with an increase in the number of products sold and do not grow significantly themselves. This means that the percentage of spending decreases, and the revenue increases, as a result of which the profitability ratio increases.

If you are analyzing the profitability of sales for assortment policy purposes

When the calculation is carried out using the formula of the net profitability of sales for the enterprise as a whole, then according to the data obtained, they can judge the general picture, but they hardly have all the necessary information to make adequate decisions.

For subsequent actions to work to improve the situation, research is required for individual product lines, groups and products. Their coefficients will allow you to rank products and find the weakest points.

But do not forget that each type of product has its own strategic role. For example, a low ROS for a company may be due to a product or service that, according to the BCG matrix, is a “money bag” (or “cash cow”). These are products with consistently high demand, providing the company with a substantial portion of the company's revenue. So giving up such a product would be a serious mistake.

ROI in action (example)

Let's say the company "Wings and Pilots" in 2016 received 30 million rubles of net profit, and in 2017 - only 23 million rubles. At the same time, the revenue was equal to 150 million rubles in 2016 and 140 million rubles in 2017. Let's calculate the return on sales using the formula for example:

In 2017, the Return on Sales indicator decreased by 3.6%, at the same time, profit decreased by 23.3%, and revenue was not so significant - by 6.7%. This ratio of changes indicates that the company has increased costs. With such a deterioration in the ratio, it is recommended to study in more depth the profitability of individual products:

These calculations using the formula for profitability of sales and determining the changes in the subsequent period showed an interesting case: the ROS ratio of product X decreases, which happens because the revenue remains the same, but the profit decreases. Such situations arise when the product has developed to "maturity". That is, promotion eats away more and more expenses.

At the same time, commodity Y showed a drop in all parameters, except for profitability. ROS is increasing because revenue has shrunk more than profits. In fact, it is possible that Y's sales began to decline, but Wings and Pilots effectively optimized spending. This happens with new products.

Product X provides most of the revenue, but this leads to a paradoxical situation in which a drop in profitability of X by 2.9% and a simultaneous increase in ROS for Y by 1.4% provide an overall decrease in the result obtained using the profitability formula.

In-depth analysis can be carried out not only for product lines or individual products, but also for network branches, touch points, sales managers. Such studies provide data for strategic decisions.

If the formula for the profitability of product sales showed a drop

The business is aimed at maximizing profit, which means that the company's strategy is based on this intention. However, any strategic decision aimed at increasing profitability faces several constraints: limited quantity resources in the company in general and in particular. Market size is also a limit, as it is extremely difficult to sell more than the market is willing to accept.

If the strategy directs work to increase the ROS ratio, then in fact we are talking either about reducing costs, or increasing profits, or, in the best scenario, about the simultaneity of these factors. And this gives real results even with a revenue ceiling that is driven by the market.

At the same time, a decrease in the indicator obtained according to the formula for profitability of sales can also be determined by a strategy, for example:

increase in depreciation payments due to recent capital investments of the enterprise. Increased spending reduces the Return on Sales ratio;
maintaining the previous level of sales of a "mature" product (as in the example above) by injecting funds into its promotion. Thus, the share of costs in revenue is growing, and profitability is falling;
market capture strategy by a dumping company. Obviously, profit decreases during dumping, but the enterprise achieves its goal.

More detailed factor analysis of sales profitability using formulas

To find the reasons for the decrease in ROS in comparison with another reporting period or with the planned value, it is recommended to conduct a factor analysis.

Formula 1. Calculating return on sales

For further analysis, the formula for profitability of sales must be detailed by breaking down the profit into indicators by which it can be calculated.

Formula 2. Detailed calculation of profitability of sales

Symbols used	Units	Decoding	Data source
		Profitability ratio	Calculations
			Statement of financial results (page 2110) or income and expenses
		Management costs	Statement of financial results (page 2220) or income and expenses
		Commercial costs	Statement of financial results (page 2210) or income and expenses
		Cost price	Statement of financial results (page 2120) or income and expenses

Revenue, cost, and expense can influence ROS in a variety of ways. The change in Return on Sales, taking into account the above factors, can be determined using the following formula for the return on sales:

Formula 3. Calculation of the change in profitability of sales under the cumulative influence of factors

Symbols used	Units	Decoding	Data source
		Change in the profitability ratio	Calculations
			Formula 4
		Change in profitability of sales due to cost price	Formula 5
		Change in profitability of sales due to selling costs	Formula 6
		Change in the profitability of sales of management costs	Formula 7

Let's take a look at all the formulas listed in the previous table as data sources:

Formula 4. Calculation of changes in profitability of sales due to changes in revenue

Symbols used	Units	Decoding	Data source
		Change in profitability of sales due to revenue	Calculations

		Revenue in the analyzed period
		Revenue in the base period	Statement of financial results (income and expenses) for the base period
			Statement of financial results (income and expenses) for the base period
		Selling expenses in the base period	Statement of financial results (income and expenses) for the base period

If the formula for profitability of sales and the change in the obtained coefficient showed a difference between the reporting periods by more than 1%, it is recommended to make a detailed factor analysis of the proceeds.

Formula 5. Calculation of the change in profitability of sales due to cost

Symbols used	Units	Decoding	Data source
		Change in profitability of sales under the influence of cost	Calculations
			Statement of financial results (income and expenses) for the analyzed period
		Cost in the base period	Statement of financial results (income and expenses) for the base period
		Administrative costs in the base period	Statement of financial results (income and expenses) for the base period
			Statement of financial results (income and expenses) for the base period
		Revenue in reporting period	Statement of financial results (income and expenses) for the analyzed period

If, due to changes in the cost of production, RP has fallen or increased by more than 1%, then this factor requires a separate study. It is important to analyze the reasons for the cost price change, since the parameters determining it (output volume, structure, level variable costs etc.) have an indirect effect on the profitability of sales.

Formula 6. Calculation of the change in profitability of sales due to selling expenses

Symbols used	Units	Decoding	Data source
		Change in profitability of sales influenced by selling costs	Calculations
		Revenue in the reporting period	Statement of financial results (income and expenses) for the analyzed period
		Administrative expenses in the base period	Statement of financial results (income and expenses) for the base period
		Cost in the reporting period	Statement of financial results (income and expenses) for the analyzed period
		Selling costs in the base period	Statement of financial results (income and expenses) for the base period
			Statement of financial results (income and expenses) for the analyzed period

The formula for the change in profitability of sales under the influence of management costs has the following variables:

Formula 7. Calculation of the change in profitability of sales due to management costs

Symbols used	Units	Decoding	Data source
		Change in profitability of sales under the influence of management costs	Calculations
		Administrative expenses in the reporting period	Statement of financial results (income and expenses) for the base period
		Administrative expenses in the base period	Statement of financial results (income and expenses) for the base period
		Revenue in the reporting period	Statement of financial results (income and expenses) for the analyzed period
		Cost in the same period	Statement of financial results (income and expenses) for the analyzed period
		Selling expenses in the reporting period	Statement of financial results (income and expenses) for the analyzed period

If the results factor analysis indicate serious reasons for the decrease in the profitability of sales in your online business, it is better not to wait for the deterioration of business, but to contact the specialists.

One of the fundamental markers of the productivity of activity is, which is defined as an index of economic viability, demonstrating the level of effectiveness of the exploitation of production and material, financial, labor and other resources.

Return on sales

Profitability includes several fundamental indicators, including such as profitability of sales.

Return on sales is a measure of how much money from the product sold should be considered as the profit received by the company.

The calculation of the return on sales is made for a certain time period and is expressed in. With the help of the latter, a company can effectively optimize its pricing strategy and costs directly related to the implementation of its own.

This indicator is characterized by an active alternation of periods of its increase and decrease. The reason for the intensive growth of the coefficient can equally be the increase in profits, and the decrease in sales volumes, and the simultaneous influence of these factors.

An increase in profits can be caused by an increase in prices, a decrease in costs, etc., as for a decrease in sales volumes, the reasons for this phenomenon may be different. If this process takes place after an increase in prices, then this is quite natural. If the reason is, for example, a loss of interest in the product, then you should adjust your activities.

Formulas and calculation features

The calculation of the return on sales is made for such purposes as:

Effective control over profits;
Monitoring the development of the company's business activity;
Comparison with the profit received by competing companies;
Optimal definition of both profitable and unprofitable realizations;
Assessment of the share of production costs in the general sales process;
Providing control over pricing policy;
In other significant for commercial activities company purposes.

To calculate the profitability of sales indicators are used different kinds of the profit received, and therefore the calculation of this coefficient is made for several different ones.

However, they all basically contain such an equation as:

Pp \u003d (P / V) * 100%, where:

Рп - profitability of sales,
P - profit,
B - revenue.

In most cases, profitability is based on such three basic values \u200b\u200bas:

gross profit,
operating profit,

The algorithm for calculating gross profit provides for dividing the latter by revenue and then multiplying the resulting result by one hundred percent - Pp \u003d (Pv / V) * 100%, where:

Рп - profitability of sales,
Pv - gross profit,
B - revenue.

Determination of gross profit is carried out by subtracting sales from the proceeds received. The indicated indicators are extracted from the Profit and Loss Statement (form No. 2)

The operating profit calculation algorithm provides for dividing profit before by revenue and then multiplying the resulting result by one hundred percent - Рп \u003d (Mon / W) * 100%, where:

Рп - profitability of sales,
Mon - profit before tax,
B - revenue,
The metrics for this calculation are also retrieved from Form # 2.

Calculated according to this formula, the return on sales demonstrates exactly what part is contained in the revenue received by the company, minus the listed and paid interest.

The algorithm for calculating the net profit provides for dividing net profit by revenue and then multiplying the resulting result by one hundred percent - Pp \u003d (Pch / V) * 100%, where:

Рп - profitability of sales,
PS - net profit,
B - revenue.

The necessary indicators for this calculation, as well as in the above cases, should also be extracted from Form No. 2.

Analysis

Calculation of profitability

Regular analysis of the company's sales profitability allows to ensure effective management of economic activity, improve the performance of the latter, increase, promptly respond to changes in market conditions, etc.

By implementing factorial profitability sales, it is necessary to comprehensively take into account the specific features of the impact of profitability on factors such as: changes in the products manufactured by the company or the services and works performed by it.

The most effective analysis is carried out over several months or even years, this approach allows you to determine the general trend economic development company and identify its weaknesses.

When conducting a profitability analysis, it is necessary to be guided by such fundamental and at the same time fairly simple criteria (applicable to absolutely all companies, regardless of their type of activity) as:

Increasing profitability is a positive trend.
The decline in profitability is a negative trend.

In order to determine the presence of certain trends in the changes in the profitability of sales, it is necessary to establish such periods as the reporting and baseline. For the latter, it makes sense to take performance indicators either for the past, or for the period in which the company received the maximum profit. Accounting for the base period is required to compare the profitability calculated in each of the mentioned periods.

Factors of reducing profitability

Why is there a decline in profitability?

The decline in profitability identified during the analysis can be caused by trends such as, for example:

The outstripping growth rates, the rate of increase in revenue - the reasons that initiated this trend can be, in particular, a decrease in prices, structural changes in the assortment of sales, and an increase in standard costs. To change the situation, an analysis of the company's pricing policy, cost control system, and assortment policy is required.
Outpacing the rate of decrease in revenue of the rate of cost reduction - a trend may arise in connection with a decrease in the level. In this situation, a comprehensive analysis of the marketing strategy is required.
Increasing costs of the company - this trend can be caused by such factors as lower prices, increase in standard costs, structural changes in the range of sales. In this situation, an analysis of the assortment policy, pricing and cost control is required.

It should be noted that the decrease in profitability revealed during the analysis is an unequivocal evidence that the company's competitiveness is falling, and the level of demand is seriously decreasing. In this kind of situation, the company needs to develop a system of procedures that will actively stimulate demand, improve the quality of products, as well as intensive development of new market sectors.

It should also be noted that if the analysis results lead to conclusions about a decrease in sales volumes or an increase in assets involved in turnover, then the ways to correct the current situation may well be enough to eliminate the causes.

However, if the main negative factor is a significant increase in costs, then all necessary corrective actions must be carried out with the utmost care, since the source of cost reduction can end quite quickly. Therefore, in this kind of situation, the best option may be a reorientation to the release of any other product.

Increased profitability

The situation of a decrease in profitability cannot be recognized as acceptable and quite naturally requires correction, for which the company needs to take measures aimed at an all-round increase in profitability.

To develop the right strategy, a company should take into account, for example, factors such as:

Fluctuating market conditions
Changes in customer demand,
Analysis of the activities of competing companies,
Saving internal reserves.

After a comprehensive study of all the above factors, it is necessary, based on the conclusions obtained as a result, to begin the practical implementation of the strategy and take concrete actions designed to correct the situation.

The main actions aimed at increasing profitability include:

Increase and modernization of production facilities.
Comprehensive control over the quality of manufactured products.
Developing an optimal marketing strategy.
Reducing the cost of products.
Appropriate motivation of personnel.

So, summing up all of the above, it is necessary to emphasize that the indicators of return on sales are one of the fundamental criteria for assessing the financial and economic activities of a company. To improve all indicators, it is necessary to properly analyze all the existing achievements and identify factors that hinder further development. After all the problems have been identified and the causes of their occurrence have been identified, measures should be carefully developed and taken to correct the negative trends in the company's development.

Write your question in the form below

Profitability is economic indicator, which shows the degree of efficiency in the use of any type of resources (material, natural, labor, capital, investment, sales, etc.). In other words, profitability is the profitability of a business, its economic efficiency and benefits.

Accordingly, if the profitability indicators are negative, then doing business is unprofitable and you need to work on the indicators increase profitability, find out the reasons for low profitability and look for ways to solve them. Profitability, its level is expressed in ratios, and relative indicators are expressed as a percentage.

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Also, profitability shows the efficiency of using certain funds, when the company not only compensates for all costs, but also makes a profit.

There is such a thing as the profitability threshold - this is an indicator (point) that actually separates the periods of unprofitable production and effective work companies (compare it to a break-even point).

To analyze the efficiency of the enterprise, the actual indicators of profitability are compared with the planned ones, with the data of past periods and with similar economic data of other companies. The ratio of total income to main flows or assets - this will be the indices (ratios) of profitability.

The main rates of return can be divided into the following main groups:

profitability of sales (profitability of sales);
return on assets (return on fixed assets);
return on investment;
profitability of current assets;
profitability equity capital;
product profitability;
income from the efficiency of using production assets;

The total profitability of the company is determined by these main indicators, depending on the field of its activity. Assets and their profitability is equal to the efficiency of using equity capital or invested funds, how assets make a profit and in what quantity, depending on the resources expended. Return on assets is calculated as the ratio of profit for a certain period to the size of assets for the same period.

Formula:

Return on assets, R act. \u003d P (profit) / A (size of assets)

According to the same parameters, economists calculate the profitability of using production assets, investment capital, and equity capital. For example, the return on equity shows how effective the investments of shareholders in the business are.

Return on sales and formulas for calculating it

Return on sales (profitability products sold) Is an indicator of profitability expressed in coefficients and displays income (its share) for each spent monetary unit. Return on sales is calculated as the ratio of net profit to total revenue.

Formula:

Return on sales, R prod. \u003d P (net income) / V (revenue).

The profitability of sales directly depends on the company's pricing policy, its flexibility according to market conditions in a particular segment. Some firms apply their external and internal strategies, study competitors' markets, product range and product lines to generate high profitability from sales.

There are no clear norms and values \u200b\u200bto indicate the profitability of a sale, since the normative value and their indicators depend on the specifics of the company's activities. Return on sales metrics show overall performance operating activities for a specific period.

Basic formulas for calculating profitability of sales

For effective management sales and control of the result of the company's activities, the profitability of sales is calculated according to the following indicators:

by gross profit;
operating profit EBIT;
according to the balance sheet;
net profitability of sales;

The profitability of sales on gross profit is an indicator (coefficient) of profitability, which means the share of profit on each earned monetary unit. This indicator is calculated as the ratio of net income (after paying all taxes) to the total amount of cash for the same period of the company's operating activities.

The formula will be as follows:

Operating profitability \u003d Gross income / Sales revenue.

Gross profit organization is still displayed in the accounting data. Return on product sales in terms of operating profit EBIT is the ratio of EBIT to total revenue. EBIT is total income, excluding all taxes and interest.

The formula for calculating this indicator:

Return on Sales on Operating Profit EBIT \u003d Total Revenue (Before Tax) / Total Revenue

Operating profit margin EBIT is also called operating profitability. This ratio is intermediate between the total return on sales and the results of the company's net profit.

Return on sales by balance - This is a coefficient that is calculated according to financial statements and characterizes the share of profit from the company's sales in the total revenue.

Calculated using the following formula:

Balance sheet return on sales \u003d total income (or loss) from sales / volume of sales proceeds.

Net sales profitability - this coefficient shows how many kopecks of net profit are in each monetary unit of revenue and is calculated as the ratio of net profit (the field of deduction of all taxes, costs and payroll fund, other expenses) to the total revenue.

Formula:

Net profitability of sales \u003d Net profit / Revenue

In order to independently calculate the data on net profitability from sales, it is enough to know the total number of units of products sold and income (after paying all relevant taxes and maintenance costs), which is not related to the non-operating activities of the enterprise (this can be exchange rate differences, investments, sales shares or other securities).

Analysis of the results. The data on calculating the profitability of sales helps the company to calculate various types of profit in the total number of revenues, but it also depends on the characteristics of the main activity of the enterprise.

Indicators for calculating profitability over several periods help to efficiently manage processes economic activity organizations, respond quickly to market fluctuations and various economic methods influence the improvement of performance and constant income generation.

Profitability indicators are used to calculate operational activities, for long-term periods it is better not to use this indicator, since the sales market is very dynamic and you need to react as quickly as possible to all its changes.

These indicators are effective for solving daily and monthly tasks and plans for the sale of products and goods.

How to improve your ROI

The main ways to increase your ROI are as follows:

reduction of production costs (cost reduction);
increase in production volumes and, due to this, gross revenue;

But the enterprise, when implementing these improvements, must have material and labor resources... Work in this direction requires the selection of highly qualified personnel, it is possible to conduct trainings among personnel in accordance with new methods and practices, which are effectively used in world economic practice.

First of all, you need to study the position of competitors in the market, the range of products presented, pricing policy, promotions and, based on this, analyze what can affect the reduction in the cost of your products.

It is necessary to compare not only the offers on the market in your region, but also take into account the features and advantages of the leading companies in the market. Perhaps the low cost is influenced by the constant introduction of new technologies, then conduct a study on how profitable it is to introduce these technologies in your business and how quickly the innovations will pay off.

As practice shows, despite the initial costs of personnel development and the introduction of new products, it may seem large, but having made economic analysis, taking into account the planned indicators, these costs always pay off.

To fully comply with market standards, you need to constantly monitor the dynamics of sales markets, customer requirements, react very quickly to all changes and fluctuations. Not only the pricing policy should be effective, but the assortment policy. The assortment must be constantly updated and improved so that buyers can see all this (people love new products and are interested in them). The quality of the products must also be appropriate.

To increase your ROI, you need to consider not only economic forces and opportunities (cost reduction, profit optimization), but also an effective marketing policy. In most cases, economists recommend removing or reducing some items of expenses to increase profitability of sales, and marketers offer effective pricing policies.

The right mix of marketing and economic solutions guarantees fixed income from products, goods or services sold.

One of the main indicators of the organization's performance is the return on sales in terms of net profit. What characterizes this indicator? How is it calculated? All the details are below.

What is net profit margin?

The concept of profitability is directly related to the success, that is, the profitability of any business. This financial indicator can be calculated for the enterprise as a whole or separately for its divisions (types of activities). In the process of calculations, it is easy to determine the return on assets, fixed assets (fixed assets), sales, goods, equity, etc. First of all, the calculation is based on the analysis of income accounting data for a certain time period.

The analysis of profitability values \u200b\u200ballows you to find out how effective the management of the funds invested in the creation and further development of the company is. Since the calculations are carried out as a percentage or as a coefficient, the higher the results obtained, the more profitable the business is. The profitability calculation is used in the following situations:

With short and long term profit forecasting.
When receiving loans and borrowings.
When exploring new directions and analyzing already existing species commercial activities.
During the comparative analysis by industry.
In order to justify the upcoming investments and investments.
To establish the real market price of a business, etc.

The indicator of return on sales denotes what part of the company's revenue is profit. In other words, how much income each ruble of sold products (works or services) brought. By controlling this ratio, the head of the firm can adjust the pricing policy, as well as current and future costs.

Return on sales by net profit - formula

When calculating the indicator, the accounting data of the organization for a given period of time are used. In particular, to determine the profitability of sales, you need information about the net profit, which is indicated on p. 2400 p. 2 "Reports on financial results" (the current form was approved by the Ministry of Finance in Order No. 66n dated 02.07.10).

The formula looks like this:

RP \u003d private enterprise / B, where:

RP is the value of the return on sales,

PE - the amount of net profit (p. 2400 f. 2),

B - the amount of revenue (line 2110 f. 2).

Additionally, to drill down on indicators, you can calculate the gross profit margin or operating margin. Formulas change in accordance with the given goals:

RP for VP \u003d VP of the firm / V, where:

RP by VP - gross profit margin,

VP of the firm - the firm's gross profit (p. 2100 f. 2),

B - the amount of revenue.

RP operating \u003d Profit before taxation (p. 2300 f. 2) / V.

What is the norm for ROI?

We have already found out that RP shows the level of profit for a certain period. In dynamics, this ratio helps to establish how the profitability of a business changes over time. For this, data analysis is carried out for several periods - basic and reporting. It is then easy to calculate the profit margin by performing factor calculations.

What is the norm for profitability? There is no definite answer to this question. Optimal indicators depend on the type and specifics of the enterprise or its division. Of course, the higher the value obtained, the better, but the results can be influenced by such signs as the duration production cycle, availability of investments, etc.

The average indicator of good profitability is recognized as a coefficient in the range of 20-30%, average - 5-20%, low 1-5%.

Return on sales - an economic indicator reflecting the company's income for each ruble earned from sales, or reflecting the share of profit in the total volume goods sold or products. Profitability of sales comes from the German concept of rentabel - profitable or profitable, and has long been an economic and marketing relative indicator of the economic efficiency of sales activities.

In practice, sales efficiency is measured by the return on sales ratio. Calculation formula return on sales ratio - the ratio of the company's net profit to revenue and multiplied by 100%

Coeff. Profit Sales \u003d (Profit / Revenue) * 100%

Western accounting system declares the concept Return on Sales (ROS) and gives the following calculation formula:

Operating Margin \u003d Operating Income / Revenue

That is, the ratio of operating profit to revenue. In other words, return on sales (ROS) - how much cash from the volume of products sold is the company's profit.

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