Profitability of production by profit from sales. Total Profitability Formula

the main objective any business is to bring money to investors and owners. In other words, any business must be profitable. What does this concept and how to calculate profitability? We will try to expand this concept as much as possible in this article.

Basic definitions

Let's figure it out: what is profitability in simple terms. Profitability is a measure of the economic efficiency of a business. Knowing given value one can understand whether the scheme of work is effectively built, whether it is possible to fight competitors, whether labor and economic resources are spent correctly.

Profitability is the economic efficiency of a business

There is a profitability not commercial organizations. It shows the efficiency of the company as a whole, its coefficient useful action. For commercial organizations, this parameter means the ratio of costs and profits. Roughly speaking, if at the end of the year the company shows profit, then it is profitable.

Types of efficiency

Any businessman should understand that different sectors of the economy have different efficiency. This means that there are several types of profitability and it would be wrong to compare them with each other.

1. Return on assets (negotiable and general). This indicator shows how much funds an entrepreneur or company has attracted to make a profit of one ruble. In order to obtain this characteristic, you need to calculate the ratio of the profit received to the value of the total number of assets. Usually the calculation is done for a certain period of time (quarter, year). In essence, the return on assets shows how effectively they can generate income.
2. The overall profitability of production. This ratio shows whether it is advisable to conduct this type of business at all. To determine it, it is necessary to divide the total costs of production by the net profit received after its sale. In order to increase the ratio, you can reduce production costs, raise the price of products, or increase the efficiency of the company.
3. The overall profitability of products. In order to find it, you need to divide the profit received from the sale of goods by the amount of expenses spent on their production. Knowing this coefficient, you can understand whether it is profitable to produce a certain product or it is better to switch to others.

Other types can also be distinguished: return on investment, personnel and cost.

Note:when calculating the return on assets, profit is calculated excluding taxes. To determine their attractiveness, you need to divide the company's profit by the value of the assets involved over a certain period of time.

The profitability ratio is calculated in absolute terms, excluding taxes, etc.

How to count

In order to find the efficiency ratio of an enterprise, one should know its financial indicators. The profitability itself, which is displayed by the letters RO, is a relative indicator. Absolute indicators include profit, sales of goods (services) and revenue. Remember that you cannot make comparisons in absolute terms, as the result will be inaccurate. It is necessary to compare approximately equal enterprises in terms of profitability - this is the only way to get a correct idea of ​​\u200b\u200befficiency.

For calculation, a simplified profitability formula is used: RO=(Profit/Rate)*100%. Here “Profit” means the total profit from the sale of goods/services. It is allowed to calculate on the basis of net, balance sheet, gross and operating profit - these indicators can be found in accounting documents. An indicator is the item whose profitability is being sought. It is indicated in terms of value.

Let's look at a small example. You need to calculate the return on sales (ROTR). That is, in the “Indicator” field, you substitute the value of sales (revenue). In order to find it, you need to multiply the price by the volume of sales (TR=P*Q).

Finding an Efficiency Factor for an Enterprise

To do this, you need to find the return on cost, which is denoted ROTC (short for returnontotalcost). The following formula is used for this: ROTC=(PR/TC)*100%. PR is the profit received. TC is the total cost. To find the PR coefficient, you need to use the formula PR \u003d TR-TC, where TR is the revenue (totalrevenue), and TC is the total cost. To find the TS, you need to add up all the costs of production: the purchase of raw materials, salaries, public utilities, advertising, warehousing, rent, etc. The resulting ROTC coefficient shows how much one ruble invested in the production of goods will bring.

Note:the ROTC coefficient can be calculated specifically for the types of products, a specific workshop, branch, enterprise.

Knowing the profitability of the enterprise, you can compare it with competitors and correct mistakes

Balance calculation

In order to calculate the efficiency using the above formulas, it is necessary to obtain the necessary data. All of them are in the balance sheet. Let's figure it out How is balance sheet profitability calculated? . Twice a year, the entire necessary information about the existing assets and capital of the company. In order to calculate the required coefficients, you need to use:

1. Available assets.
2. Investment size.
3. The size of the company's capital.

Once you have these values, find average at the beginning and end of the selected period.

Let's look at an example: we need to calculate the profitability of non-current assets. Examine the balance and find the corresponding numbers at the end of the last period and the beginning of a new one. Add them up and divide by 2. Usually, in the statements, the amount of non-current assets is indicated in section 1 line 190. To calculate the profitability, we use the formula: RO (a.vn) \u003d (PR / (VnAnp + VnAkp) / 2) * 100%. Here PR is the profit received, VnAnp is the total value of non-current assets at the beginning of the new period, and VnAkp is the value at the end of the previous period.

Having calculated RO (a.vn), we find out how many kopecks one ruble brings, invested in non-current assets.

When conducted by market entities economic activity it is required to constantly analyze its results and the effectiveness of the efforts expended, as well as draw conclusions about the prospects for business development.

This is a measure of the profitability of the enterprise. The parameter shows how efficiently the resources (natural, economic, labor, financial) are used. In a non-profit structure, profitability (R.) is considered to be performance. In business, exact numbers are important. It is compared with efficiency - the ratio of total costs to total income. If at the end of the reporting year you are in the black, the business is considered profitable.

Main types

• General return on assets(and non-current). The characteristic shows which financial ones were involved by the company in order to make a profit equal to 1 ruble. It is calculated from the ratio of income before payment of all taxes, as well as the value of the company's existing assets for a particular time period (year, month, quarter). Calculated by dividing income (before tax) by the average total value of attracted assets for the same period of time;
• R. goods- the ratio between sales proceeds and costs;
• R. production. It characterizes the feasibility of doing business, shows the ratio of costs to the final net income. Production with a positive balance is considered profitable. To increase the indicator, measures are taken to reduce costs and improve product quality.

Other types of profitability, calculation formulas

For the most complete disclosure of the concept, we will provide visual calculation schemes.

1. ROA = Profit ⁄ Asset Value × 100% where ROA is R. assets. Own and attracted (accounts receivable, loans) are taken into account.
2. ROFA- R. fixed assets (OF). The indicator is similar to the previous one.
3. ROE = profit ⁄ equity × 100%, where ROE is R. Capital. The ratio indicates how effectively the company's own funds are used. The difference between the performance of assets and liabilities shows the amount of loans that are used in the business. The main coefficient in the analysis of activities in developed countries.
4. ROI- R. investment. The ratio between income and the amount of initial investment. Let's take stock as an example. The investor bought Gazprom's securities for 149.5 rubles, but having noticed the decline in the market, he sold them for 135.2 rubles. The loss amounted to 14.3 rubles. The result is a negative investment efficiency of 9.56% (14.3 ⁄ 149.5 × 100% = -9.56%). The ROI ratio cannot be considered the main indicator of the company's success, because. it cannot reflect situations that arise with operational flows (loans). But still the main turnover is reflected clearly.

The analysis of economic activity is carried out taking into account current and one-time costs. The following coefficients are distinguished:

• ROM- R. products. Indicates the ratio of income from the sale of products to its cost. Calculate for all delivered goods and for certain types. Formula:

Rp= (P / Sp) × 100%,
where Rp - R. products, P - profit received from sales, Sp - cost of production.

• The profitability ratio of production evaluates the degree of efficiency in the use of the organization's property (PF and). Formula:

Rp\u003d (Pb / (Fos.fond. + Phob.sredst)) × 100%,
where Rp - R. production (%), Pb - balance sheet profit (thousand rubles), Fos.fund - cost of fixed capital (average for the year, thousand rubles), Fob.funds - size of fixed assets (thousand rubles) .

Additional views

• Coefficient return on sales– ROS (return on sale). It is calculated by the ratio of net income from the sale of goods to the company's revenue. The parameter reflects the percentage of profit in each earned ruble. Based on this, prices are formed and the costs of the company are displayed.
• ROL- R. staff. The ratio that arises between the net profit of the enterprise and average headcount workers. A quantitative threshold must be observed in order to obtain maximum income.
• R. contracting services. The parameter is obtained by dividing the difference between the costs of performing the work. Calculated according to the formula: Rother services = (Zneprev. - Zpredstav.) / Zpredstav. In case of non-fulfillment of obligations, the contractor will incur losses that will be associated with fines.

Conclusion

When doing business, analyze the results of work, evaluate the effectiveness of efforts.

Profitability- relative indicator economic efficiency. The profitability of an enterprise comprehensively reflects the degree of efficiency in the use of material, labor and monetary and other resources. The profitability ratio is calculated as the ratio of profit to the assets or flows that form it.

In a general sense, the profitability of products implies that the production and sale this product brings profit to the company. Unprofitable production is production that does not bring profit. Negative profitability is a loss-making activity. The level of profitability is determined using relative indicators - coefficients. Profitability indicators can be conditionally divided into two groups (two types): and return on assets.

Profitability of sales

Return on sales is a profitability ratio that shows the share of profit in each earned ruble. Usually calculated as the ratio of net profit (profit after tax) for a certain period to expressed in cash sales volume for the same period. Profitability formula:

Return on Sales = Net Profit / Revenue

Return on sales is an indicator pricing policy company and its ability to control costs. Differences in competitive strategies and product lines cause significant variation in return on sales values ​​in different companies. It is often used to evaluate the operating efficiency of companies.

In addition to the above calculation (profitability of sales by gross profit; English: Gross Margin, Sales margin, Operating Margin), there are other variations in the calculation of the profitability of sales indicator, but for the calculation of all of them only data on the profits (losses) of the organization (i.e. e. data of Form No. 2 "Profit and Loss Statement", without affecting the data of the Balance). For example:

• return on sales by (the amount of profit from sales before interest and taxes in each ruble of revenue).
• return on sales by net profit (net profit per ruble of sales revenue (English: Profit Margin, Net Profit Margin).
• profit from sales per ruble invested in the production and sale of products (works, services).

Return on assets

Unlike indicators of return on sales, return on assets is considered as the ratio of profit to the average value of the company's assets. Those. the indicator from form No. 2 "Report on financial results" is divided by the average value of the indicator from form No. 1 "Balance sheet". Return on assets, as well as profitability equity, can be considered as one of the indicators of return on investment.

Return on assets (ROA) is a relative performance indicator, divided by dividing the net profit received for the period by the total assets of the organization for the period. One of the financial ratios included in the group of profitability ratios. Shows the ability of the company's assets to generate profit.

Return on assets is an indicator of the profitability and performance of the company, cleared of the influence of the amount of borrowed funds. It is used to compare enterprises in the same industry and is calculated by the formula:

where:
Ra - return on assets;
P - profit for the period;
A is the average value of assets for the period.

In addition, the following indicators of the effectiveness of the use of certain types of assets (capital) have become widespread:

Return on equity (ROE) is a relative measure of performance, quotient of dividing the net profit received for the period by the equity of the organization. Shows the return on shareholders' investment in the enterprise.

The required level of profitability is achieved through organizational, technical and economic measures. Increasing profitability means getting more financial results at lower costs. The threshold of profitability is the point separating profitable from unprofitable production, the point at which the company's income covers its variable and semi-fixed costs.

According to most start-up entrepreneurs, the main problems arise at the stage of organizing and launching a business project. In practice, the situation is somewhat different, in fact, after the launch, no less difficulties and various questions arise. Perhaps one of the most important is how to properly assess the level of efficiency of a business process.

In the course of economic activity, it is far from always convenient (or even possible) to evaluate economic activity using direct quantitative indicators. What ?

Profit shows how much you actually earned in the course of implementing a particular business. Similarly, other quantitative indicators, including revenue, net income, gross income, liquidity, assets, sales, rent, margin, and so on.

Direct economic indicators cannot really characterize how effective the introduction of economic activity is. It was to determine the economic efficiency that the indicator of profitability was invented. When we say what profitability is, we unambiguously say how this or that business process is effectively implemented in the object under study. In conditions of fierce competition, this is what becomes the factor determining the success or defeat of the company.

Scientific definitions and calculation methodology.

Profitability(German Rentabel - profitable, useful, profitable), a relative indicator of economic efficiency.

Profitability shows how efficiently certain resources are used by an object in manufacturing process, while showing how much net profit is obtained (in relative terms) when using one unit of resources.

In practice, the use of the profitability indicator allows, when conducting an analysis, to clearly determine which of the areas or types of business is appropriate to develop, and where it makes sense to revise the business strategy and the impact of the cost level on sales volumes.

• The cost of production is 100 thousand rubles.
• Profit 10 thousand rubles.
• Efficiency is 10%

Which means that for every ruble invested, 10 kopecks of profit will be received.

• The cost price is 50 thousand rubles
• Profit 7 thousand rubles
• Efficiency = 14%

For every ruble invested, you can earn 14 kopecks

Withdrawal at a lower profit, it is more expedient and cost-effective to invest in company B (invest).

Main types

Basic designations various profitability indicators:

• ROM Product profitability
• ROFA Profitability of fixed assets
• ROS Profitability of sales (Return on sales or Margin on sales)
• ROL Staff profitability (Return on labor)
• BEP Ratio of basic profitability of assets (Basic earning power)
• ROA Return on Assets
• ROE Return on equity
• ROIC Return on invested capital (Return on invested capital)

There are three main types used everywhere in the analysis of economic and financial and economic activities.

1. Profitability of products (goods, services). The indicator is calculated as the ratio of net profit from the sale of products to the full cost of its production or sale. It characterizes the efficiency and economic feasibility of the production or sale of a particular product. Usually in retail calculate the generalized profitability for a certain nomenclature.
2. Profitability of production. A broader group of indicators used to analyze certain types of business or projects by investors and owners. The tool characterizes the overall efficiency and economic feasibility of running a certain type of business.
3. Return on assets. A very large group of profitability indicators, the main purpose of which is to show the efficiency of the use of assets, including financial assets at every stage of the business process. They calculate and analyze profitability, both with and without loans, before taxes, before dividends, and so on. Each of these indicators helps to clearly determine whether or not there is a sense in using credit resources, cash flows(which is unprofitable). How effectively all assets are used at each stage, including cash, the use of such instruments is very important for attracting investors or preparing investment proposals.

Formulas and methods of calculation

Efficiency is calculated by the following formulas.

• ROM = (profit (loss) from the sale of products, works, services / Sales) * 100%

• ROFA = PE / Fixed assets * 100%

• ROS = EBIT/SALES= Operating Profit/Revenue * 100%

• ROL = Net profit/Average headcount

• BEP = EBIT/Assets * 100%

• ROA = Net Income / Assets * 100%

• ROE = Net profit / Equity * 100%

ROIC = EBIT* (1- Income tax rate) / Invested capital * 100%.

or alternative

ROIC = (EBIT* (1-rate income tax) - amount of % on borrowed capital)/(equity capital + borrowed capital)

Dupont's formula for determining return on equity, which relate to financial ratios included in the group of profitability ratios

ROE = (Net Income / Revenue) × (Revenue / Assets) × (Assets / Equity)

= (Net Profit Margin (NPM)) × (Asset Turnover) × (Cap Ratio)

= (Net profit / Equity)

The efficiency indicator can be defined as a relative indicator as a percentage, in the formula we multiply the indicator by 100%. On the other hand, you can also use to

Profitability- a relative indicator that characterizes the degree of economic efficiency of the use of any resource (material, monetary, labor). It is calculated according to special formulas, usually has a percentage expression. Profitability can be called the most important indicator for evaluating the activities of a commercial enterprise.

This concept is used very widely, is divided into several types, but, in principle, it represents the ratio of the received from the activity to any asset or resource.

Therefore, the profitability ratio is calculated by dividing the amount of profit by the value of interest. Both values ​​are accepted in the same units. Since it is rather difficult to express profit in non-cash form, the denominator is also given in monetary terms. Most often, profitability is calculated as a percentage.

It should be noted that the approach to profitability ratios is not as strict as to purely mathematical formulas, there is a replacement of words that are similar in sound and content of concepts. So the profitability of production can be considered both as the profitability of the process, and as profitability production complex. Therefore, it is worth considering not only the name of the term, but the components of a particular formula, their practical meaning.

The most common are the following profitability indicators:

• Product profitability(realized) - the profit received from the sale of a certain amount of products is divided by the cost of this product.

It is calculated in much the same way profitability of services sold. Only in the denominator is taken the cost of providing a certain number of services in the numerator.

• Profitability of fixed assets- the ratio of net profit from activities for the period to the cost of fixed assets.
• Profitability of the enterprise- equal to the ratio of profit to the total cost of fixed and current assets of the enterprise
• Staff profitability- represents the ratio for a certain period to the average number of personnel for a specified period.

The following indicators are also used:

• General- the ratio of net profit for the period to the average total value of the company's assets.
• - the same as the above coefficient, but in relation to the equity capital of the organization.
• Return on assets used- profit before taxes and mandatory interest in relation to the amount of equity and long-term loans.

The list of profitability ratios used is not limited to those listed above. With the development of economic and financial relations, the development of investment, new, previously unused coefficients appear. General rule their unifying factor could be approximately expressed as the ratio of the value of the benefit (profit) received to the resource used to obtain it.

Let us dwell on the most commonly used in our conditions and, therefore, indicators that are informative for us:

Profitability of sales(ROS, from the English Return on Sales,) is a very important indicator that reflects the share of profit in the total amount (turnover). Most often, profit before taxes is used in the calculation - operating profit. This seems reasonable, since the amount of taxes is not directly related to the efficiency of activities, and profitability, first of all, is an indicator economic effect. But it can also be applied net profit margin. This allows you to better represent the real benefits of sales.

Accordingly, the return on sales can be calculated using the following formulas:

Total return on sales = Gross profit/ Revenue;

Net return on sales = Net profit / Revenue.

The concept of revenue can be replaced by the concept of turnover, which does not affect the essence of the ratio.

These ratios are used primarily to assess the current state of affairs. Profitability of sales allows you to determine the operational efficiency of the organization, i.e. her ability to organize and control current activities. Which, in turn, shows the direction of the company's movement, fall or rise.

Profitability products sold is defined as the ratio of profit from the sale of products to the sum of the costs of production and sale of these products. Costs, in this case, include material costs for production (the cost of raw materials, components, energy, etc.), wages, overheads, trading costs.

RRP = (CPU - PSP) / PSP x 100;
Where:

• Ррп - profitability of sold products;
• CPU - selling price of products;
• PSP - the total cost of this product.

Sometimes this ratio is called the profitability of production (as a process).

The profitability of production (as a production complex) is calculated as the ratio of the amount of profit (total) to the sum of the costs of fixed and normalized working capital.

ORP \u003d OP / (OS + OBS);

Where ORP - the total profitability of production;

OS - fixed assets of the enterprise (buildings, structures, equipment);

OBS - normalized working capital(production stocks, semi-finished products for the production cycle, finished products in warehouses).

Based on the foregoing, we can conclude that the concept of profitability is very broad. Methods and formulas for its calculation are a flexible working tool for determining the profitability, benefits from certain investments in material, human and other resources, assets.

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