Profitability, together with profitability, profit and loss, is one of the most important economic indicators of an enterprise and indicates the level of cost recovery. It forms the basis for determining the investment attractiveness of a business.
It is necessary
- Information about the economic activity of the enterprise:
- - turnover or revenue;
- - income;
- - costs;
- - the cost of fixed assets;
- - the cost of current assets.
- All this data is contained in the reporting documents
Instructions
Step 1
Starting to directly determine the profitability, make the following calculations: Determine the net profit. To do this, deduct the expenses incurred for the same period from the income received by the enterprise. You will receive profit before tax. Then the taxes paid should be removed from this amount. This will be the desired net profit.
Step 2
Add up the value of fixed assets and current assets by selecting the appropriate data from the balance sheet.
Step 3
If you have a sales organization, then you can only determine the level of profitability of sales. To do this, divide the amount of profit received by the turnover and calculate the corresponding percentage. Moreover, if the enterprise is diversified, then it is necessary to isolate the profit from the sale, excluding non-core income.
Step 4
For other industries, this method is not indicative. In this case, you should choose a different path and determine the profitability of the enterprise as the ratio of profit to the cost of fixed assets and current assets, already calculated in step No. 3. And also as a percentage.
Step 5
When calculating, keep in mind that in some taxation regimes where the ledger of income and expenses is used, the latter calculation is almost impossible. If fixed assets can still be isolated here, then the definition of assets is very difficult. But for a small business, determining the profitability of sales is usually sufficient.
