Profit and profitability

The main goal of each commercial enterprise, with which its activities are carried out, is to obtain profit. Profit and profitability are among the most important indicators that characterize its activities and indicate success or failure. From the growth of the company's profit, the emergence of new potential opportunities for it depends, as well as profit affects the level of business activity. It is for profit that the share of income received by the founders and owners is determined. Profit and profitability are inextricably related concepts. When calculating the profitability of borrowed and own funds, fixed assets, capital and shares, the profit indicators are taken into account. In addition, that profit, or rather, its receipt is the main objective of the activities of each commercial organization, it (profit) is one of the most important economic categories.

As an economic category, the profit of an enterprise reflects net income, which is created in the sphere of material production. At the enterprise, the form of profit takes a net income.

Profit is characterized by the economic effect, which is obtained in the course of the enterprise. If the enterprise has a profit, it means that the company's revenues exceed its costs.

Profits are characterized by a stimulating function. This indicator is also a financial result, as well as the main element of financial resources. At well-functioning enterprises, the share of net profit that remained at the disposal of the enterprise after the payment of all compulsory payments is enough to finance the expansion of production, the development of the enterprise in the scientific, technical and social spheres, as well as the encouragement of workers in material form.

It should be noted that in order to assess the effectiveness and economic feasibility of the enterprise, only absolute indicators are not enough. In this aspect, profit and profitability must be considered together. In addition , profitability indicators provide an opportunity to see a more objective picture. Profitability indicators are relative characteristics of activity efficiency and financial results.

The term profitability came from the word rent - literally "income". The broad meaning of the term profitability means profitability, profitability.

Profitability indicators are used in conducting a comparative assessment of the level of efficiency, which characterizes the work of individual enterprises and industries engaged in the production of different volumes and types of products. These indicators are a characteristic of the profit received in relation to the resources that were spent in the production and sale process. The most frequently used indicators that analysts operate on are the profitability of products, as well as profit and profitability of production.

The majority of enterprises profit from production and entrepreneurial activities. Profit and profitability directly depend on the ability of managers to effectively use planning, analysis, and marketing tools.

Efficiency of any enterprise directly depends on knowledge and understanding of market conditions, as well as the ability to timely adapt the development of production to the constantly changing conditions of the external environment.

The positive value of profit is formed by the correct choice of the production profile; Creation of competitive conditions for the sale of products; Production volumes; Ability to reduce production costs.

Profit and profitability are the most important economic indicators!