Video: Levels of profitability and their definition
2024 Author: Henry Conors | [email protected]. Last modified: 2024-02-12 02:44
The profitability levels used in the calculations make it possible to characterize some profitability of the enterprise. Distinguish between the profitability of products and the enterprise as a whole. This indicator can be used in the analysis of three indicators: sold products, an individual product and a heading as a whole. The levels of profitability of products sold can be characterized by calculating the ratio of the corresponding profit to the total cost. When calculating the profitability of the entire commodity item, a similar formula is used, but the profit from the sale of such a commodity item and its cost are taken into account.
The profitability levels of an individual product are calculated based on the ratio of profit received per unit of product to the corresponding cost. In this case, the profit on the product is calculated by finding the difference between its price (wholesale) and the cost.
The level of overall profitability can be defined as the ratio of profit (book) to the averagethe cost of fixed assets involved in the production process, as well as working capital, calculated on the basis of accepted standards. In other words, we can say with confidence that this indicator is an indicator that reflects the increase in the total amount of invested assets (capital).
Analysis of the level of profitability is the basis for calculating the prospects for the development of a business entity, based on its economic performance. However, such calculations should be supplemented by two more key indicators, such as the return on the number of turnovers of capital and total turnover.
The number of turnovers of capital is the ratio of the revenue of the analyzed entity to the amount of its capital. At the same time, it is considered that the greater the amount of the gross proceeds of the enterprise, the greater the number of turnovers of its capital.
The indicator of profitability of turnover reflects the relationship between the gross turnover of a business entity and its costs (costs). It should be noted that the higher the level of profit in comparison with the total revenue of the company, the better the profitability of turnover.
Profitability levels contain the main indicator - the ratio of total profit to the value of production assets.
Based on practical economic calculations, it is necessary to note a large number of factors that reflect both external and internal influence. At the same time, external factors include factors that do not depend on the work of the enterprise team (for example,material prices, freight rates and depreciation rates). These activities are carried out on a general scale and have a significant impact on the overall results of economic and financial activities of a business entity. Changes in the structure of the product range affect the volume of finished products sold, as well as the profitability and cost of production.
The main task of economic analysis is the timely identification of the negative impact of external factors, as well as determining the amount of profit that can be obtained due to the impact of internal factors. In this case, it is impossible to do without calculating the efficiency of using all production resources.
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