What does the definition of "enterprise profitability" include?

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What does the definition of "enterprise profitability" include?
What does the definition of "enterprise profitability" include?

Video: What does the definition of "enterprise profitability" include?

Video: What does the definition of
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The definition of "profitability" is an indicator of economic efficiency or utility. Simply put, this concept characterizes the level of profitability, as well as the efficiency of the use of various resources, such as labor, material or monetary. In addition, the definition of the profitability of an enterprise is expressed by the degree of rationality in the use of the we alth of the earth. Thus, the calculation of the presented coefficient is carried out as the ratio of the amount of profit to the available assets, flows or resources. A similar ratio can be expressed in profit per unit, or in profit, which is contained in each received unit.

Definition of profitability
Definition of profitability

The definition of "profitability" is a percentage. It should also be noted that this concept is least dependent on the inflation rate, however, it has a fairly close interaction with the amount of profit.

Determining the profit and profitability of each individual enterprise can be carried out usinganalysis of calculated indicators, such as the return on assets, current assets, fixed assets, return on investment and equity, as well as the return on total investments. Let's take a closer look at some of these indicators.

Determining the profitability of an enterprise
Determining the profitability of an enterprise

Return on equity

This indicator plays a special role in financial analysis. This characteristic is expressed by the following formula: the profit received after various contributions to social funds, as well as the payment of taxes, is divided by the available equity capital. At the same time, the definition of "return on equity" shows the amount of profit in relation to the funds invested by shareholders.

Return on Assets

It shows the ratio of profit after deductions to the average value of assets. Profitability of this kind is a characteristic of the profit that an organization receives from one ruble invested in the process of asset formation. In other words, this indicator expresses the degree of profitability of the enterprise for a particular period.

Definition of profit and profitability
Definition of profit and profitability

Return on fixed production assets (OPF)

This indicator is expressed as the ratio of net profit to the value of the average cost of OPF. Like other indicators presented, the resulting value must be multiplied by 100%, since, as mentioned earlier, each of the profitability indicators is relative.

Return on current assets

As in all previous ratios, this indicator is the ratio of net profit to the value of current assets.

Defining "ROI"

Includes the efficiency and rationality of the use of the contributed funds aimed at the development and promotion of the organization. This indicator can be found by the following formula: the total amount of profit is divided by the total balance, from which the value of the amount used to repay short-term obligations was previously deducted.

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