What is profit? Profit structure, its planning, distribution and use in market conditions

2024 Author: Henry Conors | [email protected]. Last modified: 2024-02-12 02:40

The financial expression of the main part of savings, which is created by an enterprise of any type of ownership, is profit. The profit structure includes the result achieved through the entrepreneurial activities of the company, while the profit itself is such an indicator that most clearly reflects the efficiency of the production process, as well as the quality and volume of manufactured products, the level of cost and the general state of labor productivity. That is why you need to understand what it is, how it is achieved and used correctly.

What is it?

One of the most important indicators characterizing the plan and evaluation of the company's economic activity is profit. The profit structure makes it possible to provide financing for various activities aimed at the socio-economic and scientific and technical development of the enterprise, as well as expanding the payroll fund for employees. It is necessary to understand correctly that it is not only a source of ensuring the various on-farm needs of the company, but alsois gradually gaining more and more importance in the field of formation of various budgetary resources, as well as charitable and extra-budgetary funds.

What is structure?

The profit structure is the ways in which a business entity receives income. It includes: income, marginal, production, gross profit, controlled contribution to profit, net profit.

Main goal

In the current conditions of market relations, each company should strive to constantly increase its own profits. The profit structure should be of such a volume that would allow the company not only to maintain an extremely stable sales position for its own products on the market, but also to achieve a dynamic development of production processes in the current competitive environment.

It is for this reason that any enterprise, before starting the production of goods, is determined by what income the implementation of certain procedures promises. In this regard, we can say that the most important task of entrepreneurial activity and, in principle, its end result is profit. The structure of profit implies the receipt of income as the most important task of any business entity, and this should be ensured at minimal cost by observing the most strict regime of saving money in spending, as well as the most efficient use of them.

The main source of financial savings of an enterprise is the proceeds received from the sale of one or anotherproducts, or rather, specifically that part of it that will remain when deducting resources for the production and further sale of goods.

Functions and economic essence

In general, the profit of an enterprise is the difference between the income received and its costs.

At the enterprise level, in the current conditions of commodity-money relations, the receipt of net income takes the form of profit, while in the commodity market, companies act as relatively isolated producers of commercial products. By setting a specific price for their own product, they sell it to end consumers, while receiving cash proceeds, but this is not yet a profit.

In order to draw up the profit structure of the enterprise and determine a clear financial result, revenue must be compared with the costs allocated for production and sale, since they represent the total cost of a particular product. Only after such calculations have been carried out, it will be possible to determine the profitability of your work. If the revenue is larger than the cost, then the financial result indicates that a certain profit structure of the enterprise is indeed visible. Thus, everyone is trying to achieve exactly this result.

An entrepreneur, when analyzing the structure of profit, sets as the main task the receipt of the maximum amount of net income, but in fact this is not always possible to achieve. If revenueapproximately equal to the cost, this indicates that in the end it was only possible to reimburse production costs, as well as the costs of selling these products. When an analysis of the profit structure shows that costs exceed revenue, this indicates that the company's operation is unprofitable, and a negative financial result is achieved, and in the end, such activities may turn into full-fledged bankruptcy.

Profit from the sale of any product is the difference between the proceeds received after the sale of any product and the cost of the product, including taxes and costs necessary for its sale and production. Accordingly, we can say that the analysis of the structure and dynamics of profits can be carried out when the enterprise receives gross income after the sale of manufactured products at the prices that were formed on the basis of supply and demand. At the same time, gross income, that is, proceeds from the sale of goods minus the necessary material costs, is a form of net profit of the enterprise.

The more cost-effective products sold by a particular organization, the better results will show the analysis of the structure and dynamics of profits and, accordingly, the more stable the financial condition of the company will become. It is for this reason that the results of the work should be studied in extremely close relationship with the application and implementation of various products.

Profit value

The structure of economic profit provides for a lot of itfunctions:

• The economic effect that is obtained in the course of the activities of a particular enterprise.
• Stimulating function. Profit is both a financial result and the main component of the financial resources of any company. The real provision of the existing principle of self-financing is completely determined by the income received.
• Source of budgeting at various levels.

From a practical point of view, profit is a general indicator of the economic activity of an enterprise, regardless of their form of ownership.

Views

Today, it is customary to distinguish two main types - economic and accounting profit. Economic is the difference between the company's total revenue and all necessary production costs (this includes external and internal), while accounting is the difference between total revenue and various external costs.

In accounting practice, profit and its structure provide for a number of relevant indicators, such as:

• balance sheet profit;
• profit from the sale of various works, goods and services;
• profit from another implementation;
• taxable income;
• financial results obtained from non-operating transactions;
• net profit.

Distribution and use

The composition and structure of profit provides for itdistribution and use as one of the most important economic processes, as it allows you to cover the needs of the entrepreneur, as well as generate state revenues.

The distribution mechanism should be formed in such a way as to provide every possible contribution to increasing the efficiency of production processes. The object of distribution is the balance sheet income of the enterprise, that is, the structure of sales profits, and its distribution means directing it to the budget, as well as for various items of application of this company.

Principles

The main principles according to which the distribution of profits is carried out can be formulated as follows:

• income received by the company through production, economic and financial activities, which are distributed between the state, as well as the enterprise as an economic entity;
• state profits are sent to the relevant budgets, such as taxes and fees, the rate of which cannot be changed arbitrarily, while the composition and rates of taxes, as well as the procedure for their calculation to the budget, must be established by the norms of the current legislation;
• the total profit of the enterprise, which remains at its disposal after taxes have been paid, should not reduce its motivation for further growth in production, as well as the constant improvement of the results of ongoing financial and production and economic activities;
• profit that remains at disposalenterprises should be primarily focused on accumulation, which will ensure its further development, and only then on consumption.

Among other things, it is worth noting the fact that enterprises also distribute net profit, that is, the one that remains at the disposal of the company after the full payment of various taxes and other obligatory payments. The collection of sanctions paid to the budget and all kinds of off-budget funds is already being carried out from it.

Legal Regulations

The income remaining at the disposal of the company can be used by it independently or directed to ensure the further development of business activities. No body, including the state, has any right to interfere in the process of how the structure of the net profit of the enterprise will be formed and the profits will be used.

Together with the financing of production activities, the income that remains at the disposal of any company can be used to meet any social or consumer needs. Thus, one-time benefits and incentives are paid out of it to people retiring, as well as all kinds of pension supplements. Among other things, the structure of profit indicators remaining at the disposal of the enterprise also provides for the production of expenses for paying for various additional vacations in excess of the period specified by laws, as well as paying for free or reduced-price meals for employees.

Individual cases

If the company violates the current legislation, the profit (the organization's profit structure should also include such an expense item) can be used to pay off all kinds of sanctions and fines.

If income is withheld from the authorized tax authorities or contributions are not made to various extra-budgetary funds, the enterprise may also be charged with appropriate pen alties, and the main source of payment is the net profit received.

The distribution of net profit is one of the main areas of intra-company planning. In accordance with the current charter of the enterprise, specialized cost estimates can be drawn up.

The structure of the total profit may include distribution to social needs, which includes various expenses for the operation of specialized social facilities that are on the balance sheet of this enterprise, holding cultural events and many others.

Separation into parts

All the profit that remains at the disposal of the company is divided into two main elements. The first allows you to increase the property of the enterprise, and also takes a direct part in the processes of accumulation. The second characterizes a specific share of the profit that can be used for consumption.

All kinds of changes in the structure of profits that led to the presence of retained earnings used for accumulation, as well as similar indicators of pastyears, they say that the enterprise is financially stable, and it has a source for further development.

Formation and use

Economic analysis is the most important stage of work that is carried out before planning and forecasting the company's resources, as well as their effective use. The profit (loss) structure is studied in several steps:

• Analysis of income by composition in dynamics.
• The procedure for factor analysis of income from sales is being carried out.
• The reasons for any deviations are carefully analyzed for such components as: other operating income, interest payable and receivable, non-operating expenses and income.
• The formation of net profit is being studied.
• Assessing how efficiently profits are distributed.
• Analyzing the application of profits.
• Proposals are being developed regarding the preparation of a financial plan.

Due to the fact that the structure of profit formation is analyzed in detail, the enterprise develops the most optimal behavior strategy, following which will allow the company to minimize losses and financial risks that are present when investing any resources in its own business. That is why this procedure is so important.