The most cost-effective products are. How to calculate return on sales: what it is and how it is derived. Return on sales ratio. How is profitability calculated? calculation formula for balance sheet and IFRS

For every entrepreneur, there are several basic indicators of business performance. Profit is just one of them.

It is critically important for people who start their own business to know how to calculate profitability. Otherwise, a seemingly successful enterprise may be unprofitable.

Online enterprise profitability calculator

What is profitability in simple words

Profitability is a reflection of the profitability of a businessman’s actions. Essentially, the concept implies the difference between expenses and income.

The expense part is associated with the costs of all types of resources, including labor, as well as depreciation - wear and tear of equipment during its operation. Income item is all the money received by an entrepreneur for the sale of goods and services.

Types of profitability

The types of profitability are determined by the direction of the enterprise's activities.

In economics, it is customary to distinguish the following types:

goods and services - the difference in resource costs and sales income, sometimes calculated for a specific product;
enterprises – accounting of all cash flows of an enterprise, used to assess the value of a business;
assets – completeness and correct use of business units.

Calculating profitability in order to clarify the balance sheet is important not only for a business owner who wants to evaluate his asset, but will also be required when selling a business and wanting to attract third-party sources of financing.

Profitability indicators

In order to get the most complete picture of business profitability, it is recommended to analyze several indicators. This way you can take into account more factors and see the situation from different angles.

Key indicators include:

assets;
products;
sale of goods and services;
employees;
capital, including investments.

Depending on the specifics of the business, other profitability indicators are also used, but even analyzing the above is enough to determine the current situation and the level of the trend.

How to calculate profitability

Profitability is determined using special formulas. The data used is taken from the books of accounts.

The key parameters required for substitution are:

profit - the difference between income and expenses, before taxes;
the value of assets on the company's balance sheet.

The formula is based on the fact that the first indicator is divided by the second, and the resulting result is multiplied by one hundred percent.

Sales return formula

Return on sales is the size of the markup that is added to the cost of a product when it is sold to an intermediary or the end consumer.

The formula is based on the ratio of profit to revenue multiplied by one hundred percent.

This parameter shows what part of the profit is in the total revenue from the product. This is important, because if it is low, it means the owner’s income is low.

Sales profitability is easy to calculate for small businesses or specific departments. When analyzing the efficiency of large companies, the indicator is rarely analyzed.

Product profitability formula

It is important to determine the profitability of products, since the main task of a business is to make a profit from the goods and services sold. The formula is based on the ratio of net profit and cost.

The calculation cycle is as follows:

A certain amount of finished goods is taken.
A time period for its implementation is determined, which is especially important for perishable items.
The cost of production is determined, that is, how much money was spent on creation.
After sales, the net profit indicator is calculated - income minus costs.

The last two parameters are inserted into the formula, and the indicator is measured.

Production profitability - formula and calculation example

Profitability of production allows not only to assess the current state of affairs at the enterprise, but also to determine the prospects for the growth and development of the company.

The calculation formula is identical for all types of business, regardless of the area of activity.

To calculate the indicator, you need to divide the production volume of profit by costs. Next, the indicator is multiplied by one hundred percent.

Let's look at an example that characterizes the calculation:

revenue from product sales amounted to 100,000 rubles;
labor costs, raw materials, trade costs - 60,000 rubles;
the profit is correspondingly equal to 40,000 thousand.

When substituting the data into the formula, the yield will be 66%.

Formula for calculating the profitability threshold

The profitability threshold is an indicator at which the enterprise will not be unprofitable, but will not make a profit.

This parameter is important for entrepreneurs in order to determine the minimum sales level that must be exceeded in order not to go into the red.

The calculation is made using two formulas:

Definition of margin. Subtract the company's variable costs from revenue, then multiply the difference by one hundred percent;
Profitability rate. The ratio of fixed costs to margin.

Thus, the key concepts influencing this indicator are:

markup on the product when selling it;
expenses for fixed and variable costs.

Return on current assets

Assets are the most important element of any business. It is on the competent and full use of existing units of employees, equipment and premises that the entrepreneur’s income will depend.

Calculating the return on current assets is one of the most common methods for assessing the value of an enterprise. Simply put, this analysis provides insight into how much money a particular person or piece of equipment is bringing in or taking away.

If the parameter is below the zero norm for all assets, the company is unprofitable, since the available resources do not bring real profit.

ROI Calculation Formula

Calculating the return on investment is important when analyzing the effective use of funds raised for a project.

The simplest calculation formula is: the ratio of profit to investment multiplied by one hundred percent.

To obtain such a parameter as profit, the cost is deducted from the total income for the billing period.

Negative profitability

If after the calculations the parameter turns out to be negative, then this is a direct indicator of the unprofitability of the enterprise. This indicates, first of all, that the businessman’s income is lower than the basic expenses. The economic position of such a person is precarious.

Gross Margin

Gross profitability reflects how much profit each ruble received from the sale of goods and services brings.

Most often, accountants are involved in calculating gross profitability. They have a special counting scheme.

Operating profitability

Operating profitability includes calculated returns on administrative and other expenses, sales and assets. That is, it is a reflection of aggregate data and provides the most accurate reflection of the state of affairs in the company.

Ways to increase enterprise profitability

If the analysis provided disappointing results, then the entrepreneur needs to take measures to increase profitability.

Before starting to take action, it is recommended to track the dynamics over several periods of time, as factors such as:

seasonality;
emergence of competitors;
rising prices for raw materials and labor in the region.

The main ways to increase profitability include:

Improving the quality of the manufactured product in order to increase the sales market.
Development of a marketing company, including advertising, search for new sales channels.
Reducing costs without compromising quality, for example, upgrading equipment or attracting highly qualified personnel to replace several people without a specialty, or reducing salaries.

An entrepreneur can make an assessment on his own using an online calculator if he knows the formula and initial data. It is also permissible to involve third-party specialists.

Any sales are carried out to achieve the same goal - making financial profit. But it is impossible to give an objective assessment of sales effectiveness without an indicator of their profitability.

What is profitability?

Return on sales, also known as the return on sales ratio, is a percentage expression of the share of profit from each ruble earned. In other words, return on sales is the ratio of net income to the amount of revenue from product sales, multiplied by one hundred percent.

Some entrepreneurs are misled into thinking that return on sales shows profitability relative to the money invested. It is not right. The return on sales ratio allows you to determine what amount of money in the volume of products sold is the profit of the enterprise minus taxes and related payments.

This profitability indicator shows profitability solely from the sales process itself. That is How much does the cost of the product pay for the costs of the production process of the product/service? (purchase of necessary components, use of energy and human resources, etc.).

When calculating the coefficient, such an indicator as the volume of capital (volume of working capital) is not taken into account. Thanks to this, you can safely analyze the profitability of sales of competing enterprises in your segment.

What does return on sales show an entrepreneur?

The return on sales ratio allows you to characterize the most important thing for a company or enterprise - the sale of main products . In addition, the share of cost in the sales process is assessed.
Knowing the profitability of sales, the company can control pricing policy and costs . It is worth noting that different companies produce goods through different strategies and techniques, which causes differences in profitability ratios. But even if two companies have the same revenue, operating expenses, and pre-tax profits, their return on sales will differ. This is due to the direct impact of the amount of interest payments on the total net profit.
Return on sales is not a reflection of the planned effect of long-term investments . The bottom line is that if a company decides to change its technological scheme or purchase innovative equipment, then this coefficient may decrease slightly. But it will regain its positions and surpass them if the modernization strategy was chosen correctly. By the way, if you want to improve your profitability, read the article “increasing profitability of sales.”

How to calculate return on sales?

To calculate the return on sales ratio, the following formula is used:

ROS– the English abbreviation Return on Sales, which translated into Russian actually means the required profitability ratio, presented as a percentage;

NI– English abbreviation Net Income, an indicator of net profit expressed in monetary terms;

N.S.– English abbreviation Net Sales, the amount of profit received from the sale of manufactured products, expressed in monetary terms.

Correct initial data and dry calculations will allow you to determine the real profitability of sales. The formula for return on sales is simple - the resulting result is an indicator of production efficiency.

An illustrative example of calculating profitability:

Unfortunately, the general return on sales formula can only show the efficiency or inefficiency of a company, but does not answer the problem areas of the business.

Suppose, after analyzing profitability data for 2 years, the company received the following figures:

In 2011, the company earned a profit of $2.24 million; in 2012, this figure increased to $2.62 million. Net profit in 2011 was $494 thousand, and in 2012 – $516 thousand. What changes did the profitability of sales undergo in 2012?

The profitability ratio for 2011 is equal to:

ROS2011 = 594 / 2240 = 0.2205 or 22%.

The profitability ratio for 2012 is equal to:

ROS2012 = 516 / 2620 = 0.1947 or 19.5%.

Let's calculate the final change in profitability of sales:

ROS = ROS2012 – ROS2011 = 22 – 19.5 = -2.5%.

In 2012, the company's sales profitability decreased by 2.5%.

Here you can see that profitability decreased by 2.5% over 2 years, but the reasons are not clear until a more detailed analysis is carried out. It includes:

Examine changes in tax costs and deductions that are required to calculate in NI.
Calculation of profitability of a product/service. Formula:

Profitability = (revenue - cost * - costs)/revenue * 100%

Profitability of each sales manager. Formula:

Profitability = (revenue - salary * - taxes)/revenue * 100%.

Advertising profitability of a product/service. Formula:

*If you provide services, then the cost includes: organization of the workplace for sales managers (computer equipment, rent of sq.m., telephone equipment, utility bills proportional to the person, etc.), their salary, telephone costs, advertising, costs for the necessary software (CRM, 1C, etc.), payments for a virtual PBX.

Let us immediately note that it is possible to use a simpler formula for return on sales: ROS = GP (gross profit) / NS (total revenue). But it is more appropriate for calculating “narrow” indicators (profitability for each manager, for a specific product, for a page on a website, etc.).

It is important to note that each manager may have a different sales structure: some sell only expensive goods and rarely, some sell small ones, but often - this is where the main difficulty will be in calculating net profit (margin after taxes). It is necessary to resort to the margin data of each product for each seller using CRM.

Calculation of sales volumes and margins. Perhaps profitability has fallen because... the most marginal product ceased to be sold.

	Selling a site	Selling contextual advertising
Profitability by formula	(500 thousand – 135 thousand – 90 thousand for taxes)/500 thousand = 55%	(900 thousand – 600 thousand – 162 thousand for taxes)/900 thousand = 15%
Sales volume per month	500 thousand rubles (cost of 5 sites)	900 thousand rubles (cost of 3 projects)
Material costs	15 thousand rubles. (purchase of a domain, payment for software, advertising, etc.)	600 thousand rubles (money given to advertising services, etc.)
Labor costs	120 thousand rubles. (salary for at least 3 employees)	40 thousand rubles. (salary for 1 employee)

We said above that part of increasing profitability of sales is reducing costs and expenses. But at the same time, we recommend that you be careful with this point because... Negative consequences may follow in the form of deterioration in the quality of goods (services) and a decrease in the efficiency of specialists. To avoid this, it is necessary to approach the issue of increasing sales profitability in a comprehensive manner! It includes studying: The table shows that, despite the fact that contextual advertising brought more money to the company’s bank account, its profitability is 3.7 times lower. This means that if managers sell websites poorly, but sell contextual advertising well, then a decrease in profitability cannot be avoided.

Competitors
Sales and Cost Structures
Sales channels
CRM uses
Managers' effectiveness

After studying all this, you can move on to developing sales tactics and strategies. And only now make operational decisions.

(1 million – 50 thousand – 135 thousand – 33 thousand)/1 million = 78.2%(1,500 thousand – 140 thousand – 240 thousand – 68 thousand)/1.5 million = 70%(180 thousand – 30 thousand – 30 thousand – 11 thousand) / 180 thousand = 60% For advertising50 thousand rubles.140 thousand rubles.30 thousand rubles. For managers3 people*45 thousand rubles=135 thousand rubles.7 people*40 thousand rubles=240 thousand rubles.1 person*30 thousand rubles. =30 thousand rub. For taxes33 thousand rubles.68 thousand rubles.11 thousand rubles. Sales per month1 million rub.1.5 million rubles180 thousand rubles

The completed data shows that it is possible to increase the costs of the offices page because they provide the greatest profitability for the business.

Calculating profitability for all layers is quite a labor-intensive task, especially if you have not done this before, and analysis is required over several months or even years (more than one week). And still, in the end, you may get an answer to the question “where are the strongest and weakest points,” but not understand what and how to do next. Therefore, we offer you our assistance in collecting, analyzing, developing recommendations, executing and monitoring the optimization of the sales department to increase business profitability.

Profitability is the most important indicator in assessing the activities of an enterprise.

It is characterized by a state where the use of funds leads not only to the enterprise covering expenses, but also to generating income.

The profitability of an enterprise is assessed by both absolute and relative indicators.

Absolute indicators are expressed in profit and are determined by value, that is, the national currency.

Relative indicators are measured as percentages and characterize profitability.

Profitability indicators are influenced by inflation processes to a lesser extent in relation to the amount of profit.

This is due to the fact that profitability is determined by different ratios of profit and capital or profit received and production costs.

Profitability is calculated regardless of the type of activity of the enterprise. Profitability indicators are the assets of the enterprise, whose profitability represents the remaining income of the enterprise.

It is divided by the average value of assets over the past period. The number obtained after division must be multiplied by 100%.

Product profitability formula: return on assets = enterprise profit: the amount of assets in the average annual indicator X 100%.

The resulting number characterizes the income received from each ruble used to create the assets of the enterprise. The assets of an enterprise and their profitability show the profitability of the enterprise for a specific time.

Thus, the profitability of products is determined by a formula abbreviated as follows: RP = P/PZ x 100%

From the above it follows that RP is an indicator of production profitability, PZ-production costs, P-profit, calculated based on production volume.

Product profitability is determined by existing calculation limitations, let's look at them:

Only quantities that correspond to each other can be correlated;
That is, only those costs that are incurred to obtain profit in a specific volume are subject to accounting.
The profitability of products sold is calculated in a similar way: the calculation includes indicators of expenses that are written off for sale and reduce profit from sales;
Before calculating the profitability of production using the formula, it is necessary to sum up all the costs incurred during the production process;
Profitability of production can be calculated after taxation of enterprises or before it.

Examples of calculations from practice

For example: an enterprise produces diapers and diapers for children. Total revenue for last month amounted to 400 million rubles.

The cost of products sold, including costs of commerce and staffing of the enterprise, is 240 million rubles.

The main indicators have been indicated, now the question arises of how to calculate the profitability of goods produced by a particular enterprise?

First you need to find the income for the previous month. The full cost is subtracted from all revenue, resulting in 160 million rubles. We apply the basic formula: 160/240x100 = 66.66%.

It turns out that the profit received from the enterprise from each ruble of production is in this case 66 rubles 66 kopecks. This is a good return on goods.

Why is it necessary to evaluate the profitability of goods? The presence of the following factors plays a role here:

Competitiveness of the enterprise in the sphere of consumption;
Production efficiency at the enterprise.

A decrease in the profitability of goods directly indicates a decrease in consumer demand for the products of a particular manufacturer, or low production efficiency at the enterprise.

Profitability can be calculated for several products belonging to a specific product group. And here we need to give another example:

The company produces three types of products with an average profitability of 30%. To calculate the profitability for each product, you need to use the basic formula, but in relation to each product separately.

The basis for the profitability of product production, in general, is the efficiency of production and sales of its products. Regardless of the company's field of activity, profitability is determined by the ratio of the profit received from the sale of the final product to the costs of its production. The formula will help calculate the current state of the company.

How to calculate?

Tracking the current state of an enterprise and monitoring the profitability of its activities is a common practice throughout the world.

For successful business development, it is not enough just to have an intuitive understanding that a project will bring profit; it is also necessary to conduct a mathematical analysis of the objective state of the market, calculating the return on the implementation of the project (product) and its payback period.

The current level of product profitability is calculated based on real data, which is reflected every month in the accounting documentation of the enterprise, as well as quarterly reports.

Calculating profitability is of interest to a wide range of people:

business owners who evaluate the correctness of the “laid course”;
creditors who monitor the economic situation of the enterprise.

The profitability of the enterprise is considered as an absolute value, thus it is easy to represent it in the form of cash (in the accounting report).

When using relative profitability indicators (ratios of absolute values that are expressed as a percentage of each other), it is necessary to give some explanations. Relative indicators are not so demonstrative.

The product profitability ratio (in its general form) demonstrates how many units of profit a businessman will receive from a unit of production costs.

The profitability ratio is written as a fraction, where the numerator is the profit earned in the process of selling the product, and the denominator is the total costs related to both commercial promotion and the technological production cycle.

The calculated coefficient must be multiplied by 100. Thus, the proportion shows the ratio of profit to total cost (full production costs).

It is important to understand that a single calculation of product profitability cannot reflect the real state of the enterprise. When conducting a comprehensive analysis, the following points should be taken into account:

the difference between the actual and planned profitability of products sold;
comparison of the data obtained during profitability calculations with competing firms for similar products;
analysis of the company's product ratings over the past few years.

There are two main concepts in searching for the profitability of an enterprise's products.

Very often, profitability is calculated only for a unit of a product, then the costs of its production and the profit received from sales from the general structure are separated.

This concept is used primarily by analysts to make forecasts. The second concept for calculating profitability is to analyze the global situation. A study of the total amounts for the reporting period is carried out.

The profitability of goods production is always considered as a percentage. This makes it possible to simplify the further use of calculated indicators for conducting a comprehensive analysis of the enterprise in the long term.

Profitability of products sold (ROM - from English Return on Margin) is an indicator that shows the efficiency of product sales in the form of the ratio between income and costs for the production of goods and their sale.

It is quite possible to open a business with minimal investment. Here you will find information about proven ideas for men and women. Profitability in practice.

Formula for profitability of products sold

In order to calculate the profitability indicator from the sale of a particular product, sales profit or net income received is used.

Two different types of cost can also be used - total cost (including selling costs) and production cost (production costs).

When calculating product profitability, the following formulas are used:

Profitability in terms of total sales profit and total cost = PR/TS*100%, where PR is the total profit; TC – total production costs;
Profitability based on profit from sales and cost of direct (production) costs = PR/TS prod. , where PR is the total profit; TS manufactured – total production costs;
Product profitability based on net profit and total cost of production cost = PE/TC, where PE is net profit (total profit minus taxes and other payments); TC – total production costs;
Product profitability, which was calculated based on net profit and cost of production of goods = PE/TC prod. , where PE is net profit; TS manufactured – total production costs.

Profit from sales is taken from the income statement (value on line 050). Profit can also be calculated using the following formula: PR=TR-TS, where PR is profit from sales; TR – sales revenue; TC – production cost (full). Revenue can be viewed in the income statement in line 010. The full cost can be easily calculated using the proposed formula: TC = line 020+ line 030+ line 040, where line 020, 030 and 040 are the costs of production, commerce and administration, respectively.

Net profit (NP), as a rule, is taken from the income statement (line value 190).

Other expenses and income are those costs that are not directly related to production costs.

Product profitability, as mentioned earlier, can be calculated both for an individual product item and for an entire group of products.

Product profitability is traditionally calculated as a percentage. The information obtained during the calculations is not of immediate interest, however, it is used to draw up an enterprise strategy for the near future.

When calculating product profitability, you should not lose sight of some important details, namely:

Factors influencing the forecast of enterprise profitability (dictation of sales figures).
The cost of goods does not always decrease. Especially when it comes to knowledge-intensive areas where modernization is necessary. Replacing equipment at the initial stage will cost a pretty penny.
Preference (if the list of goods is heterogeneous) must be given to those whose profitability is the highest.

Standard product profitability is usually calculated over time, using sampling over several months or years.

As a result, information users receive an illustrated picture of the effectiveness of management at the enterprise.

The formula for calculating product profitability shows a reliable result, however, the correctness of the calculations is largely influenced by the tax system that operates in the country.

Calculation examples

To understand the process of calculating the profitability indicator, let's look at a few simple real-life examples.

Let’s say the total revenue received from the sale of goods from an enterprise producing baby diapers over the past month amounted to 500 million rubles. The cost of production of sold products (including costs of commerce and administrative personnel) is 265 million rubles. Determine the profitability of the products that the enterprise produces.

First, let's find the profit from the sale of goods for the past month.

To do this, we subtract the full cost from the total revenue: 500-265 = 235 million rubles.

We will find the profitability of products using the calculation formula: PR/TS*100, where PR is the profit from sales, TS is the total cost of production costs.

Let's substitute the values: 235/265*100%=88.68%. Profitability of product sales shows how much profit the company receives from each ruble of products sold. In our case, the profit is 88.68 kopecks. This is a fairly high profitability of the product. By analyzing the product profitability indicator, you can assess the competitiveness of a company in the market to promote new products. If the profitability of a product falls, this indicates a decrease in demand for the company's products or low production efficiency at the plant.

The profitability indicator can also be calculated for several products that form a specific product group at the same time.

Let's look at the second example.

The company produces three types of products with an average profitability of 26%. Sales revenue and cost for each product are presented in Table 1. It is necessary to find the profitability for each product and give recommendations to the company regarding the further production of products.

To calculate the profitability of products, we will use the formula from the first example.

Profitability of commercial products. Formula: “A” = 9/27*100%=33.3%;

Profitability of product “B” = 8/22*100%=36.36%;

Profitability of product “B” = -1.89%.

If we analyze the absolute value, then product “A” brings more profit than “B”. However, in reality, “B” is 3 kopecks more profitable (3.06%). Thus, the company needs to focus on producing product “B”. Regarding product “B”, it should be said that this product is unprofitable, i.e. brings a loss. Accordingly, the production of product “B” must be stopped immediately. The loss for each ruble of costs is 1.89 kopecks.

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In the system of enterprise performance indicators, the most important place belongs to profitability.

Profitability represents a use of funds in which the organization not only covers its costs with income, but also makes a profit.

Profitability, i.e. enterprise profitability, can be assessed using both absolute and relative indicators. Absolute indicators express profit and are measured in monetary terms, i.e. in rubles. Relative indicators characterize profitability and are measured as percentages or as coefficients. Profitability indicators are much less influenced than by profit levels, since they are expressed by different ratios of profit and advanced funds(capital), or profits and expenses incurred(costs).

When analyzing, the calculated profitability indicators should be compared with the planned ones, with the corresponding indicators of previous periods, as well as with data from other organizations.

Return on assets

The most important indicator here is return on assets (otherwise known as return on property). This indicator can be determined using the following formula:

Return on assets- this is the profit remaining at the disposal of the enterprise, divided by the average amount of assets; multiply the result by 100%.

Return on assets = (net profit / average annual assets) * 100%

This indicator characterizes the profit received by the enterprise from each ruble, advanced for the formation of assets. Return on assets expresses a measure of profitability in a given period. Let us illustrate the procedure for studying the return on assets indicator according to the data of the analyzed organization.

Example. Initial data for analysis of return on assets Table No. 12 (in thousand rubles)

Indicators	Actually	Deviation from plan



5. Total average value of all assets of the organization (2+3+4)
(item 1/item 5)*100%

As can be seen from the table, the actual level of return on assets exceeded the planned level by 0.16 points. This was directly influenced by two factors:

above-plan increase in net profit in the amount of 124 thousand rubles. increased the level of return on assets by: 124 / 21620 * 100% = + 0.57 points;
an above-plan increase in the enterprise's assets in the amount of 993 thousand rubles. decreased the level of return on assets by: + 0.16 - (+ 0.57) = - 0.41 points.

The total influence of two factors (balance of factors) is: +0.57+(-0.41) =+0.16.

So, the increase in the level of return on assets compared to the plan took place solely due to an increase in the amount of net profit of the enterprise. At the same time, the increase in average cost, others, also reduced the level return on assets.

For analytical purposes, in addition to indicators of profitability of the entire set of assets, indicators of profitability of fixed assets (funds) and profitability of working capital (assets) are also determined.

Profitability of fixed production assets

Let us present the profitability indicator of fixed production assets (otherwise called the capital profitability indicator) in the form of the following formula:

The profit remaining at the disposal of the enterprise multiplied by 100% and divided by the average cost of fixed assets.

Return on current assets

Profit remaining at the disposal of the enterprise multiplied by 100% and divided by the average value of current assets.

Return on Investment

The return on invested capital (return on investment) indicator expresses the efficiency of using funds invested in the development of a given organization. Return on investment is expressed by the following formula:

Profit (before income tax) 100% divided by the currency (total) of the balance sheet minus the amount of short-term liabilities (total of the fifth liability section of the balance sheet).

Return on equity

In order to obtain an increase through the use of a loan, it is necessary that the return on assets minus interest on the use of a loan is greater than zero. In this situation, the economic effect obtained as a result of using the loan will exceed the costs of attracting borrowed sources of funds, that is, interest on the loan.

There is also such a thing as financial leverage, which is the specific weight (share) of borrowed sources of funds in the total amount of financial sources for the formation of the organization’s property.

The ratio of the sources of formation of the organization's assets will be optimal if it provides the maximum increase in return on equity capital in combination with an acceptable amount of financial risk.

In some cases, it is advisable for an enterprise to obtain loans even in conditions where there is a sufficient amount of equity capital, since the return on equity capital increases due to the fact that the effect of investing additional funds can be significantly higher than the interest rate for using a loan.

The creditors of this enterprise, as well as its owners (shareholders), expect to receive certain amounts of income from the provision of funds to this enterprise. From the point of view of creditors, the profitability (price) indicator of borrowed funds will be expressed by the following formula:

The fee for using borrowed funds (this is the profit for lenders) multiplied by 100% divided by the amount of long-term and short-term borrowed funds.

Return on total capital investment

A general indicator expressing the efficiency of using the total amount of capital available to the enterprise is return on total capital investment.

This indicator can be determined by the formula:

Expenses associated with attracting borrowed funds plus profit remaining at the disposal of the enterprise multiplied by 100% divided by the amount of total capital used (balance sheet currency).

Product profitability

Product profitability (profitability of production activities) can be expressed by the formula:

The profit remaining at the disposal of the enterprise multiplied by 100% divided by the total cost of products sold.

The numerator of this formula can also use the profit indicator from sales of products. This formula shows how much profit an enterprise has from each ruble spent on the production and sale of products. This profitability indicator can be determined both for the organization as a whole and for its individual divisions, as well as for individual types of products.

In some cases, product profitability can be calculated as the ratio of the profit remaining at the disposal of the enterprise (profit from product sales) to the amount of revenue from product sales.

Product profitability, calculated as a whole for a given organization, depends on three factors:

from changes in the structure of sold products. An increase in the share of more profitable types of products in the total amount of production helps to increase the level of profitability of products.;
changes in product costs have an inverse effect on the level of product profitability;
change in the average level of selling prices. This factor has a direct impact on the level of profitability of products.

Return on sales

One of the most common profitability indicators is return on sales. This indicator is determined by the following formula:

Profit from sales of products (works, services) multiplied by 100% divided by revenue from sales of products (works, services).

Return on sales characterizes the share of profit in revenue from product sales. This indicator is also called the rate of profitability.

If the profitability of sales tends to decrease, then this indicates a decrease in the competitiveness of the product in the market, as it indicates a reduction in demand for the product.

Let's consider the procedure for factor analysis of the return on sales indicator. Assuming that the product structure remains unchanged, we will determine the impact on the profitability of sales of two factors:

changes in product prices;
change in product costs.

Let us denote the profitability of sales of the base and reporting period, respectively, as and .

Then we obtain the following formulas expressing the profitability of sales:

Having presented profit as the difference between revenue from sales of products and its cost, we obtained the same formulas in a transformed form:

Legend:

∆K— change (increment) in profitability of sales for the analyzed period.

Using the method (method) of chain substitutions, we will determine in a generalized form the influence of the first factor - changes in product prices - on the return on sales indicator.

Then we will calculate the impact on the profitability of sales of the second factor - changes in product costs.

Where ∆K N— change in profitability due to changes in product prices;

∆K S— change in profitability due to changes in . The total influence of two factors (balance of factors) is equal to the change in profitability compared to its base value:

∆К = ∆К N + ∆К S,

So, increasing the profitability of sales is achieved by increasing prices for products sold, as well as reducing the cost of products sold. If the share of more profitable types of products in the structure of products sold increases, then this circumstance also increases the level of profitability of sales.

In order to increase the level of profitability of sales, the organization must focus on changes in market conditions, monitor changes in product prices, constantly monitor the level of costs for production and sales of products, as well as implement a flexible and reasonable assortment policy in the field of production and sales of products.