Business, whatever it is, requires costs. Businesswoman investing in new project, expects a return in the form of high profits and its constant growth. To assess the investment efficiency indicator, business profitability is calculated. We will tell you in the article what it gives and how it is determined.

Each entrepreneur determines the need to calculate profitability for himself. Large companies employ an economist, whose responsibilities include regular calculations of operational efficiency and planning of further work taking into account the obtained values. In addition to total profitability, for this purpose, the net return on assets, return on fixed assets, investments, sales, personnel, equity and other ratios are calculated.

How is profitability determined?

Calculating the profitability of a business is not so difficult if you have ready-made financial statements at hand. For individual entrepreneurs Those who do not keep accounting records or are just planning to open their own business will have to put everything together “by eye.” Profitability is calculated mainly as a percentage. The calculation formula is as follows:

Profitability of production = (Profit on balance / Costs of production and sales) x 100

This calculation will allow you to determine how much profit before taxes falls on 1 ruble of funds spent. For convenience, you can find a convenient online calculator online or download a special program. On average, the normal coefficient is 15-35%, but highly depends on the specifics commercial activities. For retail 10-15% is a decent result, but for the beauty or construction industry this figure will be small. For these areas you need to start from 50-100%, for legal services, trading in intangible assets - from 100%.

The above calculation shows the nominal value of profitability. There is also real profitability - the one that is determined taking into account inflation. To assess the purchasing power of an enterprise. When the indicator turns out to be low or even negative, this indicates a lack of operational efficiency and impending bankruptcy. A business with high profitability is considered promising, fully receiving a return on investment.

Factors influencing the level of profitability

Since profitability is a relative indicator, its value largely depends on internal changes in the company and external market conditions. The main ones:

• Labor productivity.
• Technical issues in production.
• Fluctuating prices for resources purchased by the enterprise, materials, third-party services, and labor.
• Changes in the assortment and prices of products sold due to changing demand and crisis.
• Seasonality, temporary equipment downtime or product defects.

The level of profitability can be increased by accelerating trade turnover, reducing costs, and rationally increasing prices. In any case, to stabilize the situation, a number of other economic indicators and points should be calculated and taken into account: labor productivity, product quality, the situation with competitors.

Example of profitability calculation

For better understanding, let us show a simple example of calculating the level of profitability using the above formula.

Initial data:

• Total expenses (purchase of raw materials, wages, rent, materials for work, fuels and lubricants, etc.) – 18 million rubles.
• Total income (revenue) – 22 million rubles.

First, let's calculate the profit: income - expenses = 4 million rubles.

Profitability = (4 million rubles/18 million rubles) x 100 = 22.2%

Calculations can be made per month, year, quarter. For convenience, profitability for each type of product or production department is often calculated separately.

It is important to compare indicators over time and take measures to improve them. Return on capital, personnel, assets and other things is also calculated separately. Economic analysis must be taken seriously. This is an opportunity to find out the company's weaknesses and improve its overall profitability.

What to do if profitability is below 10% or, conversely, higher?

In general, Zhenya and Dima have good profitability, both businesses are effective.

​Now let's figure out which profitability is normal and which is not so good.

If profitability is below 10%

If profitability is below 10%

Let's say you have 5 million and you want to invest it somewhere profitable.

If you put this money in the bank at 10% per annum, in a year you will withdraw 5.5 million. At the same time, you don’t have to hire people, work with suppliers and sweat in negotiations. Sit upright, and the interest drips.

Now let’s try to invest the same 5 million in a business where the profitability is 10%. That is, the same as the interest they give in a bank. At the same time, you need to invest time, sweat, well, you understand. This is not beneficial at all.

Do not invest in a business with a profit margin below 10%

Don't invest in business
​with profitability below 10%

Reasonable profitability - 20-40%

If you have family business, hobby or business by passion, a profitability of 20% is not the worst option.

Not everyone is meant to do business for the money. But we advise you to work on increasing profitability or look for other business options.

Good profitability - from 40%

The example with Zhenya shows that profitability can be more than 100%.

You can already work with a profitability of 40%. You will have money to develop your business yourself or take risks and attract other people's funds. For example, take out a loan from a bank, and if the investment does not pay off, pay off the debt from your savings.

This economic category was introduced to describe how efficiently an enterprise's operations are conducted overall. , or by individual components. For example, according to working capital. It helps you understand how many kopecks you can get by investing one ruble in a particular business. If we talk about sales efficiency, then profitability shows the share of profit in revenue.

To determine the indicator you need to use . The main thing is to remember that there are several of them, one for each type of indicator:

• The general level of the indicator is calculated as follows. All income received, constituting the balance sheet profit, is divided by the result of the addition average price by current assets, and the average price category of the main part in production. We multiply the result of previous actions by one hundred percent.
• Selling profitability is highlighted separately.
  PP = dividing income from the sale of goods by net profit after all operations. It is impossible to do without introducing a standardized average value bar. It will help summarize many calculations that have already been made. This produces a special number with an average result.
• By assets. To determine net production income, divide it by the value of assets in a given time period.
• By investment. in its pure form it is divided into reserves of equity capital, to which are added liabilities designed for a long time.
• In terms of capital available to the enterprise. To calculate the net profit, divide it by the entire amount of savings.

Definition of Negative Profitability

For managers negative indicator profitability is an important signal. It shows how unprofitable the production turned out to be in a particular case. Or a negative result on sales of a certain product. Negative profitability occurs with higher production compared to a decrease in operating profit. And the total price is not enough to cover all production costs.

The greater the negative profitability according to absolute data, the greater the deviation of the price level from the equilibrium value that could be considered effective.

Negative profitability shows that management is not effectively using available funds.

What indicators are considered acceptable?

To protect itself, each enterprise must conduct inspections of its main facilities and types of products in advance. Implementing the following recommendations will have a positive impact:

• Calculation of the total tax burden and comparison with similar data related to a particular activity.
• Calculation of burdens associated with income tax. For manufacturing enterprises low rate– 3% or less. Trade organizations are considered unprofitable at less than 1%.
• The next step should be the value of the share of deductions in the amount of tax, which is calculated from the tax base. This figure should not exceed 98%.

Specific data on areas of activity

There is no single indicator; in each industry it is calculated separately for each year. Profitability in the mining industry is considered normal at 50%. For the woodworking sector it does not even reach 1%. For services, a level of 12-20% is considered acceptable.

Conducting cost-benefit analysis

The profitable parameter is also called the profitable rate. Because the indicator reflects how much profit there was after the sale of services and goods with work.

If parameters in this direction fall, it means that the demand for products and the level of their competitiveness decreases. Then we need to think about additional measures to stimulate demand. There is a need to develop new market niches, or to improve the quality characteristics of the product.

When is it carried out? factor analysis In terms of profitability of sales, the influence of figures on how prices change in goods and services with work and how it affects the cost level deserves special consideration.

Identification of the reporting period and reference time is required to identify trends in changes in profitability in sales. The base period allows you to use for:

• last year
• time when the company makes the greatest profit

The base period is needed in order to compare the indicators with what was taken as a basis during the calculations.

Reducing costs or increasing prices for the range offered helps increase profitability. An organization must focus on several parameters at once in order to make the right decision. We are talking about competitive activity and its assessment, the possibility of saving internal resources, fluctuations in consumer demand. The dynamics of market conditions are also studied separately.

It is planned to use tools that have become an integral part of the policy on goods and prices, sales, and communications.

Profits are also being increased in several directions at once:

1. Motivation for staff. It becomes a separate sector in management activities proper organization personnel labor. Sales of the final product, reduction of defects in products, and production of products with higher quality depend to a certain extent on the responsibility of employees. Incentive and motivational strategies will improve the quality of work performed by employees. For example, holding events and so on.
2. Cost reduction. To do this, you need to identify suppliers whose prices are much lower than those of competitors. Despite the savings on materials, it is necessary to ensure that the final quality of the product does not decrease.
3. Creation new policy in the field of marketing. Product promotion should be based on research of market conditions and consumer preferences. Large companies create entire departments that deal specifically with marketing. Or hire a separate specialist responsible for carrying out marketing activities. This policy is not complete without financial investments, but the results are fully justified.
4. Determination of acceptable quality. Demand is increasing only for quality items. An enterprise should take all measures to increase it if profitability indicators noticeably decrease.
5. Increase in production capacity. The production process becomes less expensive when implemented scientific achievements, although they require certain investments. It is possible to modernize the equipment that is already in service. Then the efficiency of work will increase, resources will be saved.

The amount of profit received often becomes the basis for assessing business performance. used to evaluate economic efficiency.

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Market subjects, leading economic activity, must regularly analyze the final results of the work performed, as well as the effectiveness of the efforts spent. Each such analysis should end with a summing up of results that will indicate further prospects for the development of business. If you need to perform an economic analysis of activity, profitability will become practically the main factor.

Profitability in simple terms

The term “profitability” means a certain indicator that determines economic efficiency, characterizing the profitability of entrepreneurial “labor”. Using this parameter, the manager can understand whether the enterprise is effectively using the resources at its disposal. Such resources may include financial, natural, as well as labor and economic resources.

If we talk about the sphere of activity of non-commercial structures, it should be noted that the profitability indicator in this case can be considered the effectiveness of the work performed by it. When we're talking about about commercial organizations, accurate quantitative indicators are important. Modern economic theory compares profitability with an indicator such as efficiency, which is the ratio of the sum of final costs and the final profit received from the company's activities.

In other words, the profitability indicator is a simple ratio of expenses and income received. If, summing up the results for last years, the accounting department announced that the company made a profit, the business is considered profitable and profitable.

Types of profitability

Today, profitability can be presented in different forms, because determining the efficiency of a business may require calculations of different content. When making calculations for different business areas, you need to take into account that the coefficients and formulas for calculating them will be different. Profitability happens:

1. The overall profitability of non-current and current assets. This characteristic indicates financial loans that were used by the organization to increase profits in the amount of 1 ruble. The coefficient is calculated based on profit ratio, which appeared on the balance sheet of the enterprise before payment of the full amount of established taxes, and the average price of all assets at the disposal of the company in a specific period of time. Total profitability can be calculated for a quarter, half a year, year or month and represents the ability of the enterprise's assets to increase profit. If you need to calculate the profitability of asset formation, you need to divide the amount of profit before taxes by the calculated average cost assets that were attracted precisely during that time period;
2. Product profitability is an economic indicator that acts as the ratio between the profit received from the sale of goods and the costs associated with their production. The resulting coefficient will give an assessment of the profitability of the production of each specific product;
3. profitability of production implies a specific economic coefficient that allows you to adequately assess the feasibility of running any business. To calculate it, it is necessary to calculate the ratio of costs and net final profit. If the balance sheet profit indicator and the balance of fixed costs are positive, the production operation can be considered profitable. To increase production profitability, it is necessary to reduce the final production cost, leaving its quality the same or improving it.

Types of profitability and calculation formulas

In addition, profitability can be reproduced by the following indicators:

1. ROS - return on sales is the ratio of profit received from the sale of the product range sold and the company's revenue. To put it simply, the ratio is the ratio of net profit remaining after deducting tax deductions and sales volumes. The indicator displays the percentage of profit included in each ruble earned by the organization. Using this coefficient, the cost of each product is formed. The indicator also provides an adequate assessment of the company’s costs;
2. ROL is an indicator of labor profitability, which is shown as the ratio between net profit and number of employees, registered at the enterprise in a certain period of time. In other words, the organization's managers must control the threshold of the number of employees at which it will be possible to obtain maximum profit;
3. The profitability of contracting services is calculated as follows:

R other services = (3 non-rep. – 3 rep.)/3 rep.

When working with contractors, it is also necessary to take into account that if the plan is not fulfilled, the contractor will suffer significant losses, for example, fines and other sanctions.

Ways to increase profitability

To determine trends in fluctuations in profitability of sales, it is necessary to establish a reporting period and a base period. As a basis for the base period, you can take the indicators that were calculated for the last quarter or year, when the profit earned by the company was maximum. Next, the coefficient of the reporting period will be compared with the coefficient for the base period.

Return on sales can be artificially increased. To do this, it is necessary either to increase the price of the goods sold or to reduce the cost. To make the right decision, a company must take into account the following factors: fluctuations in consumer demand, market dynamics, assessment of the work of competitive organizations, and so on.

In general, to improve profitability, profitability must be improved. You can do this in the following ways:

1. increasing production capacity. The use of technological progress requires additional material investments, but allows savings in the further course of the production process. Production equipment already in place at the enterprise can be modernized, thereby saving resources and increasing labor efficiency.
2. by improving the quality of products you can significantly influence the increase in demand;
3. having developed a competent marketing policy that will be based on product promotion through the use of market conditions and customer preferences. Large enterprises have entire departments dedicated to marketing. In small enterprises, the functions of a marketer are performed by managers.
4. reducing the cost of the product range sold. This can be done by finding suppliers who offer the necessary raw materials, products or services at prices lower than those of competitors. The main thing here is to monitor the quality, which should not suffer.

Hello! Today we’ll talk about profitability, what it is and how to calculate it. aimed at making a profit. The correct operation and effectiveness of the management methods used can be assessed using certain parameters. One of the most optimal and informative is the profitability of the enterprise. For any entrepreneur, understanding this economic indicator is an opportunity to assess the correctness of resource consumption in the enterprise and adjust further actions in all directions.

Why calculate profitability

In many cases, the financial profitability of an enterprise becomes a key indicator for analyzing the activities of a business project, which helps to understand how well the funds invested in it pay off. Correctly calculated indicators for several factors and items are used by the entrepreneur for pricing services or goods, for general analysis at the working stage. They are calculated as a percentage or used in the form of a numerical coefficient: the larger the number, the higher the profitability of the enterprise.

In addition, it is necessary to calculate enterprise profitability ratios in the following production situations:

• To forecast the possible profit that the company can receive in the next period;
• For comparative analysis with competitors in the market;
• To justify large investment investments, helping a potential transaction participant determine the projected return on a future project;
• When determining the real market value of a company during pre-sale preparation.

Calculation of indicators is often used when lending, obtaining loans or participating in joint projects, developing new types of products.

Enterprise profitability

Discarding scientific terminology, we can define the concept:

Enterprise profitability as one of the main economic indicators that well characterizes the profitability of an entrepreneur’s labor. Its calculation will help you understand how profitable the chosen project or direction is.

Many resources are used in the production or sales process:

• Labor (hired workers, personnel);
• Economic;
• Financial;
• Natural.

Their rational and correct operation should bring profit and constant income. For many enterprises, analysis of profitability indicators can become an assessment of operating efficiency for a certain (control) period of time.

In simple words, business profitability is the ratio between the costs of the production process and the resulting profit. If after a period (quarter or year) a business project has produced a profit, then it is called profitable and beneficial for the owner.

To carry out correct calculations and predict indicators in future activities, it is necessary to know and understand the factors that influence profitability to varying degrees. Experts divide them into exogenous and endogenous.

Among exogenous ones there are:

• Tax policy in the state;
• General sales market conditions;
• Geographical location of the enterprise;
• Level of competition in the market;
• Features of the political situation in the country.

In many situations, the profitability and profitability of an enterprise is influenced by its geographical position, proximity to sources of raw materials or consumer clients. The situation on the stock market and exchange rate fluctuations have a huge impact.

Endogenous or internal production factors that greatly influence profitability:

• Good working conditions for personnel of any level (which necessarily has a positive effect on product quality);
• Efficiency of the company's logistics and marketing policy;
• General financial and management policies of management.

Taking into account such subtleties helps an experienced economist make the level of profitability as accurate and realistic as possible.

Factor analysis of enterprise profitability

To determine the degree of influence of any factors on the level of profitability of the entire project, economists conduct special factor analysis. It helps to determine the exact amount of income received under the influence of internal factors, and is expressed by simple formulas:

Profitability = (Profit from sales of products / Cost of production) * 100%

Profitability = ((Product price - Product cost) / Product cost)) * 100%

Typically, when conducting such financial analysis, a three-factor or five-factor model is used. Quantity refers to the number of factors used in the counting process:

• For the three-factor factor, the profitability of manufactured products, the indicator of capital intensity and turnover of fixed assets are taken;
• For the five-factor it is necessary to take into account labor and material intensity, depreciation, and turnover of all types of capital.

Factor calculation is based on the division of all formulas and indicators into quantitative and qualitative, which help to study the development of the company with different sides. It shows a certain relationship: the higher the profit and capital productivity from the production assets of an enterprise, the higher its profitability. It shows the manager the relationship between standards and business results.

Types of profitability

In different production areas or types of business, specific indicators of enterprise profitability are used. Economists identify three significant groups that are used almost everywhere:

1. Profitability of products or services: the basis is the ratio of the net profit received from the project (or direction in production) and the costs spent on it. It can be calculated both for the whole enterprise and for one specific product;
2. Profitability of the entire enterprise: this group includes many indicators that help characterize the entire enterprise as a whole. It is used to analyze a working project by potential investors or owners;
3. Return on assets: a fairly large group of various indicators that show the entrepreneur the feasibility and completeness of using a certain resource. They allow you to determine the rationality of using loans, your own financial investments or other important assets.

Analysis of the profitability of an enterprise should be carried out not only for internal needs: this is an important stage before large investment projects. It may be requested when providing a loan, or it may become the starting point for enlarging or reducing production.

A real complete picture of the state of affairs at the enterprise can be obtained by calculating and analyzing several indicators. This will allow you to see the situation from different angles and understand the reason for the decrease (or increase) in expenses for any items. To do this, you may need several coefficients, each of which will reflect a specific resource:

1. ROA – return on assets;
2. ROM – level of product profitability;
3. ROS – return on sales;
4. ROFA – return on fixed assets;
5. ROL – personnel profitability;
6. ROIC – return on investment in an enterprise;
7. ROE – return on equity.

These are just a small number of the most common odds. To calculate them, it is enough to have figures from open sources - the balance sheet and its annexes, current sales reports. If an estimated assessment of the profitability of a business for launch is needed, the data is taken from a marketing analysis of the market for similar products or services, from competitors’ reports available in a general overview.

Calculation of enterprise profitability

The largest and most general indicator is the level of profitability of the enterprise. To calculate it, only accounting and statistical documentation for a certain period is used. In a more simplified version, the formula for enterprise profitability looks like this:

P= BP/SA*100%

• P is the main profitability of the enterprise;
• BP is an indicator of balance sheet profit. He equal to the difference between revenue received and cost (including organizational and management costs), but before taxes are subtracted;
• CA – the total cost of all current and non-current assets, production capacity and resources. It is taken from the balance sheet and its annexes.

For the calculation, you will need the average annual cost of all tangible assets, the depreciation of which is used in the formation of the selling price for services or goods.

If the assessment of the enterprise's profitability is low, then certain management measures should be taken to improve the situation. It may be necessary to adjust production costs, reconsider management methods or rationalize the use of resources.

How to calculate return on assets

A complete analysis of an enterprise's profitability indicators is impossible without calculating the efficiency of using various assets. This is the next important stage, which helps to assess how fully all assets are used and understand their impact on profit. When assessing this indicator, pay attention to its level. A low value indicates that capital and other assets are not performing sufficiently, while a high value confirms the correct management tactics.

In practice, the return on assets (ROA) indicator for an economist means the amount of money that falls on one unit of assets. In simple words, it shows the financial return of a business project. Calculation for all types of assets must be carried out regularly. This will help to timely identify an object that does not bring return or benefit in order to sell it, lease it or modernize it.

In economic sources, the formula for calculating return on assets looks like:

• P – profit for the entire analyzed period;
• A is the average value by type of asset for the same time.

This coefficient is one of the three most revealing and informative for a manager. Getting value less than zero indicates that the enterprise is operating at a loss.

Return on fixed assets

When calculating assets, the profitability ratio of fixed assets is separately identified. These include various means of labor that are directly or indirectly involved in the production process without changing the original form. The period of their use must exceed a year, and the amount of depreciation is included in the cost of services or products. Such basic means include:

• Any buildings and structures in which workshops, offices, laboratories or warehouses are located;
• Equipment;
• Heavy duty vehicles and loaders;
• Office and work furniture;
• Passenger cars and passenger transport;
• Expensive tool.

Calculating the profitability of fixed assets will show managers how effective economic activity business project and is determined by the formula:

R = (PR/OS) * 100%

• PE – net profit for a certain period;
• OS – cost of fixed assets.

This economic indicator is very important for commercial manufacturing enterprises. It gives an idea of ​​the share of profit that falls on one ruble of invested fixed assets.

The coefficient directly depends on profitability and should not be less than zero: this means that the company is operating at losses and is using its fixed assets irrationally.

Profitability of products sold

This indicator is no less important for determining the level of profitability and success of the company. In international economic practice, it is designated as ROM and is calculated using the formula:

ROM=Net profit/cost

The resulting coefficient helps determine the efficiency of sales of manufactured products. In fact, this is the ratio of sales income and costs of its production, packaging and sale. For an economist, the indicator clearly demonstrates how much each ruble spent will bring in percentage terms.

The algorithm for calculating the profitability indicator may be more understandable for beginners products sold:

1. The period in which it is necessary to analyze the indicator is determined (from a month to a whole year);
2. The total amount of profit from sales is calculated by adding up all income from the sale of services, products or goods;
3. Net profit is determined (according to the balance sheet);
4. The indicator is calculated using the above formula.

A good analysis will include a comparison of profitability of products sold over several periods. This will help determine the decline or increase in the company’s income over time. In any case, you can conduct a more in-depth review of each supplier, group of products or assortment, and work through the customer base.

Return on sales

Margin or return on sales is another important consideration when pricing a product or service. It shows what percentage of total revenue comes from the profit of the enterprise.

There is a formula that helps calculate this type of indicator:

ROS= (Profit / Revenue) x 100%

As a basis for calculation, can be used different types arrived. Values ​​are specific and vary depending on the product range, company activity and other factors.

Sometimes experts call return on sales the rate of profitability. This is due to the ability to show the share of profit in total sales revenue. It is also calculated over time to track changes over several periods.

In the short term, a more interesting picture can be given by operating profitability of sales, which can be easily calculated using the formula:

Operating return on sales = (Profit before tax / Revenue) x 100%

All indicators for calculations in this formula are taken from the “Profit and Loss Statement”, which is attached to the balance sheet. The new indicator helps the entrepreneur understand what real share of revenue is contained in each monetary unit of his revenue after paying all taxes and fees.

Such indicators can be calculated for a small enterprise, one department or an entire industry, depending on the task at hand. The higher the value of this economic coefficient, the better the enterprise performs and the more profit its owner receives.

This is one of the most informative indicators that helps determine how profitable a business project is. Without calculating it, it is impossible to draw up a business plan, track costs over time, or assess the profitability of the enterprise as a whole. It can be calculated using the formula:

R=VP/V, Where:

• VP – gross profit (calculated as the difference between the revenue received from the sale of goods or services and the cost);
• B – proceeds from sale.

The formula often uses a net profit indicator, which better reflects the state of affairs at the enterprise. The amount can be taken from the balance sheet appendix.

Net profit no longer includes income tax, various selling and overhead expenses. It includes current operating costs, various penalties and paid loans. To determine it, the total revenue that was received from the sale of services or goods (including discounts) is calculated. All expenses of the enterprise are deducted from it.

It is necessary to carefully select the time period depending on the task of financial analysis. To determine the results of internal control, the calculation of profitability is carried out over time regularly (monthly or quarterly). If the goal is to obtain an investment or loan, a longer period is taken for comparison.

Obtaining the profitability ratio provides a lot of information for the management personnel of the enterprise:

• Shows the correspondence between actual and planned results, helps evaluate business performance;
• Allows you to conduct a comparative analysis with the results of other competing companies in the market.

If the indicator is low, the entrepreneur needs to think about improving it. This can be achieved by increasing the amount of revenue received. An alternative is to increase sales, raise prices slightly, or optimize costs. You should start with small innovations, observing the dynamics of changes in the coefficient.

Personnel profitability

One interesting relative indicator is personnel profitability. Almost all enterprises, regardless of their form of ownership, have long taken into account the importance of effective labor management. They influence all areas of production. To do this, it is necessary to monitor the number of personnel, their level of training and skill, and improve the qualifications of individual employees.

The profitability of personnel can be determined using the formula:

• PE – net profit of the enterprise for a certain period of time;
• CH – number of employees at different levels.

In addition to this formula, experienced economists use more informative ones:

1. Calculate the ratio of all personnel costs to net profit;
2. The personal profitability of one employee, which is determined by dividing the costs associated with him by the share of profit brought to the enterprise budget.

Such a complete and detailed calculation will help determine labor productivity. Based on it, you can carry out a kind of diagnostics of jobs that may be reduced or need to be expanded.

Do not forget that the profitability of personnel may be affected by low-quality or old equipment, its downtime or other factors. This can reduce performance and incur additional costs.

One of the unpleasant, but sometimes necessary methods is often reducing the number of employees. Economists must calculate the profitability for each type of personnel in order to highlight the weakest and most vulnerable areas.

For small enterprises, regular calculation of this coefficient is necessary in order to adjust and optimize their expenses. With a small team, it is easier to carry out calculations, so the result can be more complete and accurate.

Profitability threshold

For many trade and manufacturing enterprises great importance has a calculation of the profitability threshold. It means the minimum volume of sales (or sales finished products), in which the revenue received will cover all costs of production and delivery to the consumer, but without taking into account profit. In fact, the profitability threshold helps the entrepreneur determine the number of sales at which the enterprise will operate without losses (but will not make a profit).

In many economic sources, this important indicator can be found under the name “break-even point” or “ critical point" It means that the enterprise will receive income only if it overcomes this threshold and increases the coefficient. It is necessary to sell goods in quantities that exceed the volume obtained according to the formula:

• PR – threshold (norm) of profitability;
• FZ – fixed costs for sales and production;
• Kvm – gross margin coefficient.

The last indicator is pre-calculated using the formula:

Kvm=(V – Zpr)*100%

• B – enterprise revenue;
• Zpr – the sum of all variable costs.

The main factors influencing the profitability threshold ratio:

• Product price per unit;
• Variables and fixed costs at all stages of production and sale of this product (service).

With the slightest fluctuation in the values ​​of these economic factors, the value of the indicator also changes up or down. Of particular importance is the analysis of all expenses, which economists divide into fixed and variable. The first include:

• Depreciation for fixed assets and equipment;
• Rent;
• All utility costs and payments;
• Salaries of enterprise management employees;
• Administrative costs for their maintenance.

They are easier to analyze and control, and can be monitored over time. Variable costs become more “unpredictable”:

• Wages of the entire workforce of the enterprise;
• Fees for servicing accounts, loans or transfers;
• Costs for the purchase of raw materials and components (especially when exchange rates fluctuate);
• Payment for energy resources spent on production;
• Fare.

If a company wants to remain consistently profitable, its management must control the rate of profitability and analyze expenses for all items.

Any enterprise strives to develop and increase capacity, open new areas of activity. Investment projects also need detailed analysis, which helps determine their effectiveness and adjust investments. In domestic practice, several basic calculation methods are more often used, giving an idea of ​​what the profitability of a project is:

1. Methodology for calculating net present value: it helps determine the net profit from a new project;
2. Methodology for calculating the profitability index: necessary to generate income per unit of cost;
3. Method for calculating marginal efficiency of capital (internal rate of return). It is used to determine the maximum possible level capital costs to a new project. The internal rate of return is most often calculated using the formula:

INR = (current net worth / current initial investment amount) * 100%

Most often, such calculations are used by economists for certain purposes:

• If necessary, determine the level of expenses in the case of developing a project using raised funds, loans or credits;
• To prove cost-effectiveness and document the benefits of the project.

If there are bank loans, calculating the internal rate of return will give the maximum allowable interest rate. Its excess in real work will mean that the new venture or direction will be unprofitable.

1. Methodology for calculating the return on investment;
2. A more accurate modified method for calculating the internal rate of return, for the calculation of which the weighted average cost of the advanced capital or investment is taken;
3. An accounting rate of return technique that is used for short-term projects. In this case, profitability will be calculated using the formula:

RP=(PE + depreciation/amount of investment in the project) * 100%

PE – net profit from a new business project.

Full payment different ways is done not only before developing a business plan, but also during the operation of the facility. This is a necessary set of formulas that owners and potential investors use when trying to assess the possible benefits.

Ways to increase enterprise profitability

Sometimes the analysis produces results that require serious management decisions. To determine how to increase profitability, it is necessary to understand the reasons for its fluctuations. To do this, the indicator for the reporting and previous periods is studied. Typically, the base year is the past year or quarter in which there was high and stable revenue. What follows is a comparison of the two coefficients over time.

The profitability indicator may be affected by changes in selling prices or production costs, increases in costs or the cost of raw materials from suppliers. Therefore, it is necessary to pay attention to factors such as seasonal fluctuations in the demand of product buyers, activity, breakdowns or downtime. When solving the problem of how to increase profitability and, it is necessary to use various ways profit increase:

1. Improve the quality of products or services and their packaging. This can be achieved by modernizing and re-equipping its production facilities. This may require serious investment at first, but in the future it will more than pay off in resource savings, a reduction in the amount of raw materials, or a more affordable price for the consumer. You can consider the option;
2. Improve the properties of your products, which will help attract new consumers and become a more competitive company in the market;
3. Develop a new active marketing policy for your business project and attract good management personnel. Large enterprises often have an entire marketing department that deals with market analysis, new promotions, and finding a profitable niche;
4. Various ways to reduce costs in order to compete with a similar range. This should not come at the expense of the quality of the product!

The manager needs to find a certain balance among all the methods in order to achieve a lasting positive result and maintain the enterprise’s profitability indicators at the proper level.