The effectiveness and efficiency of any commercial enterprise is assessed not only using a system of absolute indicators (revenue, profit, cost), but also a number of relative indicators, one of which is profitability. The general sense of profitability is to compare costs and benefits.
Instructions
Step 1
To assess the efficiency of the enterprise, the profitability indicator is used. You can find it by dividing your sales profit by your total cost of sales. The profitability of sales characterizes the amount of profit that each ruble of costs invested in production and sale brings to the company. Sometimes, instead of profit from sales, when calculating this indicator, net profit is used. But in this case, the profitability will be influenced by factors related to the supply and marketing and other activities of the organization, as well as the procedure and principles of taxation.
Step 2
In addition to the profitability of products, when assessing the efficiency of the enterprise, the indicator of profitability of sales is used. It is defined as the ratio of profit from sales or net profit to the amount of proceeds from sales. This indicator allows you to monitor changes in pricing policy. Product profitability shows the share of profit in the total revenue of the enterprise. It is this indicator that makes it possible to decide which way the profit will increase: by increasing the volume of production or reducing the cost of production.
Step 3
When analyzing the activities of an enterprise, you can calculate the return on assets. It is defined as the ratio of profit (net, gross or from sales) to the average value of the organization's assets for a certain period. Return on assets shows how much profit the company will receive for each ruble invested in property.
Step 4
When determining the profitability of the enterprise, do not forget to calculate the return on equity (equity) capital. It is determined by dividing net profit by equity. This indicator is the most important for shareholders, as it reflects the profitability of the funds they have invested in the company.
