Profitability is one of the main indicators of the system for assessing the effectiveness of the enterprise. It characterizes the level of return on costs, the completeness and quality of the use of resources in the production process and sales of products.
Instructions
Step 1
In general, the effectiveness of the functioning of an economic entity can be assessed in two directions: the speed of achieving the set goal and the effectiveness of converting costs into income. The second area is of greatest interest, since the firm's management is interested in identifying indicators that can be easily compared and quickly compared.
Step 2
Among the indicators that give an idea of the efficiency of resource use, the return on sales is the most objective indicator that allows you to compare the tactical and strategic goals of the enterprise. It is calculated as the ratio of the profit from sales to the proceeds from the sale of products. This indicator characterizes such an aspect of the company's activities as the sale of products, and also estimates the share of costs in sales.
Step 3
Many factors influence the profitability of sales. An increase in production costs, as well as a drop in demand for it, can lead to its decrease. If this indicator tends to decrease, then they speak of a decrease in the company's competitiveness in the market and a drop in demand for its products.
Step 4
If such a situation arises, it is necessary to analyze the structure of costs, to identify the reasons for their growth. In the structure of the cost, it is necessary to determine the most essential items and the possibility of their reduction without reducing the rate of production.
Step 5
If the profitability of sales has decreased due to a drop in sales volumes, you should pay attention to marketing factors, as well as the quality of products. To increase this indicator, an enterprise must focus on changing market conditions, monitor the level of prices for products, monitor the level of cost of manufactured and sold products, and also pursue a flexible assortment policy.