Any enterprise aims to make a profit, while the amount of revenue received is not an indicator of the development of the organization. One of the most important indicators of the level of development of an enterprise is profitability. Profitability in the broadest sense shows the ratio of the level of costs and the received profit.
Profitability is a measure of a company's performance that allows it to assess how an enterprise's resources are being used. The level of profitability reflects how much profit the organization will receive from each invested ruble. Do not think that profitability characterizes only the money spent, there are indicators of profitability of a product, product, turnover, etc.
External and internal factors
Factors affecting profitability are divided into internal and external. Internal factors include production and non-production factors. Production factors are the ability to use labor and financial resources. At the same time, production factors are divided into extensive and intensive.
Extensive factors are called the impact on the process of making a profit due to quantitative changes: an increase or decrease in the volume of financial resources, a decrease and increase in the number of employees, changes in the time spent, etc. Intensive factors are characterized by qualitative changes, for example, an increase in labor efficiency through the modernization of equipment and the use of higher quality materials or an increase in the qualifications of personnel. Analysis of the factors of profitability allows the company to find the most effective ways to increase the profitability of the company.
Sources of profitability improvement
The main sources of increasing the profitability of an enterprise are: an increase in profits, an increase in the level of sales of products, a decrease in production costs, an increase in product quality, etc. For example, to reduce the cost of production, it is recommended to reduce the cost of raw materials and materials or to upgrade equipment. To reduce labor costs, experts recommend reducing the number of employees and improving the qualifications of other employees. To increase the efficiency of the use of fixed assets, it is recommended to preserve unused equipment, dispose of depreciated fixed assets, rent out unused premises, etc.
In modern economic conditions, one of the important factors in increasing profitability is the methodical work of an enterprise to save resources, this leads to a decrease in costs, and, accordingly, to an increase in profits.
