The profitability of products shows the result of current costs
Profitability comes from the word "rent", andRent, literally, means income. Proceeding from this, profitability is profitability, profitableness. In simple terms, this is a situation where revenues exceed expenditures. In this case, from the economic point of view, any enterprise that makes a profit can be considered profitable.
Profitability indicators give a characteristicthe work of the enterprise, show how profitable the various directions of its activities are. They more fully than profits give a characteristic of the final results of management, since their value shows the ratio of the result (effect) to the available resources and inputs consumed in the production process. They are less than the profit indicators, depend on inflation. Profitability indicators are used to assess the performance of an enterprise, as a tool in investment policy, as well as pricing.
There are several groups of profitability indicators:
- Indicators that characterize the profitability of the main and investment activities.
- Indicators characterizing the profitability of sales or profitability of turnover.
- Indicators demonstrating how much capital is available or its parts.
Profitability of products and enterprises
It is calculated as a whole for the enterprise, and for each type of products. The size of this indicator depends on the quantity and structure of the products produced by the enterprise.
The profitability of production is determined by the ratio of profit to cost.
P = P / C * 100, (%).
Profitability of products shows which products are more profitable for production, that is, what products are worth producing, and what is not. The cost of production must correspond to the cost.
The profitability of the products shows the amount of profit per ruble of current costs. It means the ratio of profit to the cost of production, sales of products. It is the rate of profit.
Р of production = (the Price - the Cost price) / the Cost price * 100, (%).
The profitability of the products shows whether production is effective and how much, and overall, the efficiency of the enterprise.
The profitability of the products shows what the result of the current costs is.
The profitability of production is calculated by the formula:
P total = Profit / (Fixed assets + Current assets) * 100, (%).
The level of profitability is calculated by the formula: УР = П / С, where
P - net profit;
С-cost of sales.
To increase this indicator, it is necessary to increase profits and reduce the cost of production.
For investment projects, the profitability index is calculated:
IR = Profit / amount of Investments.
Profitability of sales = Profit / amount of revenue.
The return on capital is estimated using the return on equity. It is the ratio of profit to the value (average annual) of invested capital.
In the process of functioning of the enterprisethere is a process of circulation of capital, which is continuous. The structure of the funds, the sources of their formation, the available resources and the enterprise's need for financial resources change, the financial condition of the enterprise changes. The external manifestation of it is the solvency of the enterprise. The internal side is characterized by financial stability, reflecting the balance of income and expenditure, the means and, accordingly, the sources of their formation.
In order to increase the level of profitability, an enterprise must necessarily conduct a flexible policy in the production and sale of products, focusing on market volatility.
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