Total and net profitability of the enterprise

Profitability, unlike the absolute profit indicator, is a relative indicator of the profitability of the enterprise. It reflects the state of the firm, in which the proceeds from the sale of goods cover all costs of production, and its further implementation. In other words, the profitability shows the profitability of the enterprise.

Any enterprise that receives at least some profit is considered to be profitable. All indicators of profitability, which are used in calculations in the economy, characterize the relative profitability as a percentage of each type of resource.

Allocate such types of indicators as the total and net profitability of the products and the enterprise itself. In this case, the products are considered in three versions: realized, marketable and individual products.

The profitability is calculated as the ratio of the company's profit to its costs or expenditure of resources. Since the indicator is relative, all results of calculations must be multiplied by 100%.

The main indicators of profitability include the total and net profitability of assets; Sources of their formation; Sales; Goods (products, services, works). Objective reflection of the picture is able to give only a complete system of these indicators.

The total profitability of current and non-current assets is defined as the ratio of profit before payment of tax payments to the average value of the value of all assets for a specific period. The value obtained shows how much funds were raised by the firm to receive each ruble of profit.

Net profitability of assets is defined as the ratio of net profit received for a particular period to the average value of assets. The result of the calculations will show what effect on the profitability of the enterprise is provided by tax deductions and other payments from the received profit.

The total profitability of sources of formation of assets is calculated as the ratio of profit before taxation to the average value of assets attracted for the period. This indicator shows the efficiency with which the company disposes of the means at its disposal, regardless of the sources that generate them.

Net profitability of sources of formation of assets is equal to the ratio of all net profit for the period of interest to all sources of asset formation. The resulting figure shows the degree of effectiveness of the use of funds depending on the sources of their formation (borrowed, own, negotiable, fixed capital).

The profitability of products (goods, works) is calculated by the ratio of the profit received to the costs of production. This value shows how effective is the production and sale of goods (services) produced.

The overall profitability of sales is the result of the ratio of the profit from sales to the payment of taxes to the net proceeds received from these sales. The indicator reveals the share of balance profit in the total income of the enterprise.

Net profitability of sales equals the ratio of net profit to turnover and trade income (sales revenue). The indicator reflects the pressure of tax payments on the company's main revenues in all areas of work. These figures are of particular importance for shareholders and creditors of the enterprise.

Net profitability shows the degree of efficiency with which these or other resources or property of the enterprise are used.

The efficiency of the enterprise is affected by a number of factors. Under the factors of profitability understand all such circumstances that can influence the formation of profits. They can be extensive (they affect profit by changing the volume of products sold) or intensive (they affect profitability by lowering the cost of production or increasing sales prices).