Level of profitability

In the modern world, many enterprises operate, and each year their number is growing rapidly. The main objective of any legal entity (or private entrepreneur) is to receive as much profit as possible, and the costs must be minimal. Such a postulate is the basis for the development or further expansion of the production activities of any enterprise without exception.

In order to properly organize your business, you need to study economic indicators, carefully monitor your financial situation, and plan and plan your company's operations properly, only this will maximize profits. The level of profitability is a general indicator of the effective operation of the enterprise, reflecting profitability relative to certain basic principles. If the amount of revenue can cover not only the cost of sales and production, but also generates profit, the firm is considered profitable.

Based on the indicators of the profitability of the structure, you can evaluate its financial results, and ultimately efficiency. They measure the profitability of the enterprise from various points of view, and group them according to the interests of the participants in the market exchange. The level of profitability just refers to such indicators and reflects the work of all aspects of the enterprise. In total there are four main groups of types of indicators of successful activity - profitability of assets and production assets, profitability of the enterprise and products.

Analyzing the level of profitability it is easy to determine which type of activity provides the greatest revenue, and, on the contrary, what provokes losses. In the modern world, such a definition is extremely important, because the financial stability of a legal entity depends on the concentration and specialization of production.

The most qualitative and generalizing indicator of the efficiency of an enterprise is the profitability of production. This indicator measures the size of fixed and circulating assets with the amount of profit received with their help. These means and are called its price, the lower this price, the greater the effect of the operation of the enterprise. Calculate the level of profitability of production can be using a simple formula - to divide the profit of Pv into the total of all the costs of OS and PF.
Urp = Pv / (OC + OF)
Where Пч - the profit sum, ОС - the sum of circulating assets, and ОФ - the sum of fixed capital.

From this formula it becomes clear what is the factor of its growth. High profit is supported by the low cost of fixed assets and working capital, and the efficiency of their work. As a result, the maximum profitability of production, and, accordingly, the economic efficiency of the enterprise.

How profitable and effective the company's operating activities, shows the profitability of sales. The level of profitability of sales is calculated according to the following formula: the ratio of the operating profit of the firm Pch with the proceeds from the sale of products B
Рч = Пч / В * 100%
Where RF - the profitability of sales is pure, and Pv - the profit of the enterprise is pure.

The level of profitability is one of the best mechanisms for determining the financial, investment and operational efficiency of production. It helps to find out the firm's profit from each ruble invested in assets. In the course of conducting it, it is easy to find out the answers to all questions about the main activity of the company, be it production, or the sale of goods, or services and works.

In today's world, without clarifying this most important factor, it is impossible to reveal the real financial condition of any enterprise and the efficiency of using its main parts of production. Therefore, you need to know how to determine all economic indicators in order to form a correct opinion about its work.