Types and indicators of profitability

To assess the comparative efficiency of individual industries and enterprises that produce different types of products in different volumes, use profitability indicators. These indicators show the ratio of the profit received to the resources spent on production. Of all the indicators, the most commonly used are indicators of profitability of production and profitability of production.

The profitability or profitability of an enterprise is usually assessed both with the help of absolute and relative indicators. Thus absolute indicators usually reflect profit which is measured in cost expression. If we consider the relative indicators that characterize profitability, then they are measured in percent or reflected in the form of coefficients. Profitability indicators to a lesser extent than the amount of profit depend on inflation, as they are relative values associated with the profit and costs of the enterprise.

The most important of these indicators is the profitability of assets , which is also called the profitability of assets. To determine it, you need to divide the remaining profit at the disposal of the enterprise by the average value of the assets of the enterprise. This indicator characterizes the profit that the enterprise receives from each ruble, attributed to the costs of the formation of its assets. It expresses the measure of profitability of the whole enterprise in a particular period. It takes into account not only the amount of profit, but also the change in the value of fixed assets, circulating and non-current assets. In general, this important indicator includes indicators of profitability of fixed assets and current assets.

Considering other types and indicators of profitability it is necessary to note such an important indicator as profitability of investments . With its help, the effectiveness of using the funds that are directed to the development of this enterprise is determined.

The next important indicator for economic analysis is the profitability of products . To determine it, the profit remaining at the disposal of the enterprise is divided into the full amount of the cost of sales. Also, for calculation, not all the total profit can be used, but only the profit received from the sale of products. The value of this indicator reflects the amount of profit that the enterprise has from each ruble invested in production and spent for the sale of products. It can be calculated both on the whole enterprise, and on separate departments of the enterprise and to separate kinds of let out production. In some cases, the ratio of the remaining profit at the disposal of the enterprise to the total amount of revenue received from the sale of products is used to calculate this indicator.

The last important factor characterizing profitability indicators is profitability of sales . To calculate this indicator, it is necessary to divide the profit received from the sale of products into total revenue from the sale of products. With its help, it is determined what proportion of the profit is made in the composition of all proceeds from the sale of the enterprise's products. This indicator is also called the norm of profitability. When you look at it, you can see that when the profitability of sales starts to decline, such a factor indicates insufficient competitiveness of the products on the market, therefore, the demand for products is reduced. To increase the level of profitability of sales, you need to focus on changing market conditions, track changes in product prices, constantly monitor the level of production costs, the costs of selling products and implement a flexible policy in the field of product range and sales.