Tip 1: How to count profitability
Calculate profitability correctly helps one of the factors
To assess the effectiveness of a particular business activity, you can use a certain profitability ratio. All profitability ratios are divided into three groups. The first group includes the coefficients that make it possible to consider the profitability of capital, also called the profitability of investments, the second includes the coefficients by which the profitability of sales is calculated, the third one includes the coefficients for calculating the profitability of production. When calculating any type of profitability use the coefficient that corresponds to the selected type of profit. Most often, gross, operational, or net income is chosen to calculate profitability.
Properly considered profitability is the task of the relevant economist.
It is to him that one should apply for drawing up a business plan, one of the main parts of which is the calculation of the profitability of the activities of the newly created structure. In the case when an existing business plan needs to add any activity and it is necessary to calculate its profitability, you can do this by contacting a specialized company authorized to provide this type of consulting services. The task of the specialist, to whose services you have applied, is to determine the ratio that is most suitable for calculating the profitability of the constituent parts of your business. Far from every novice economist is able to consider profitability correctly. In order not to remain in the red, it is better to contact a specialist with experience and high qualifications.
During the evaluation of the effectiveness of the organization’s economic activities, the specialists use the calculation of profitability indicators, which are also known under a different name - profitability ratios. To determine the overall performance of the organization, you need to know the value of this indicator.
To determineprofitability organizations can use such official company documents as “Balance Sheet” and “Profit and Loss Report”. The profitability index of an enterprise shows how efficiently all the company's property assets, namely current and fixed assets, are used in its activity. A more accurate sense of the profitability ratio is to calculate the amount of profit that an organization gets when investing one ruble in its production assets. To determine the level of profitability of the company, it is necessary to use the formula: RP = BP / (TIP. + PF), where RP is the value of the company's profitability;
BP - accounting (book) profit of the organization, obtained in the reporting period;
Or.- calculated for the reporting period, the average value of the value of current assets;
RUR - calculated for the reporting period, the average value of the value of non-current assets.
The accounting (balance) profit of an organization is the profit that a company received based on the results of the reporting period and is the basis for calculating the income tax. In other words, it is an organization’s profit before tax. To find out the value of this indicator, it is necessary to remove from the amount of revenue received from the sale of services and goods: - management and commercial costs;
- cost of services provided or goods sold;
- balance from non-sale activities;
- balance from operating activities.
To calculate the average value of the production assets of an organization, it is necessary to find out their book value at the beginning and end of the analyzed period. Then, using the formula to determine a simple average value, calculate the average value of the property of the organization in the reporting period.