Even if you do not have an economic education, you can hardly do without the ability to determine profitability in business. Profitability is a clear indicator of the meaning of any commercial activity. Observing how profitability changes over time, you can make competent management decisions concerning absolutely all areas of the organization's activities: from cost reduction and pricing to assortment policy and creating your own sales network.
Instructions
Step 1
There are many types of profitability. But more often than not, when it is necessary to determine the profitability, they mean the profitability of sales or the profitability of products. In order to visually make the necessary calculations, we will use a simple example.
Let's say you bought a batch of goods for 80,000 rubles. This batch was sold for 120,000 rubles. Thus, we received a profit of 40,000 rubles.
Step 2
In order to determine the profitability of sales, you need to divide the received profit from the sale by the proceeds from the sale and multiply the result by 100 percent, since the profitability is usually considered as a percentage.
40 000 / 120 000 * 100 = 33, (3) %
The return on sales, therefore, shows the share of profit in revenue, and in our example it was 33%.
Step 3
In order to determine the profitability of a product, the opposite is done. It is necessary to divide the received profit from the sale by the cost of purchasing a batch of goods and, again, multiply by 100 percent.
40 000 / 80 000 * 100 = 50 %
Product profitability shows how much profit is accounted for for each unit of goods sold.
