Profit in the economy is ... Definition, types, formation, use

Profit in the economy is the ratio of the cost to the value of the products sold in terms of money equivalent. About how it is analyzed, how it is formed, and how it is distributed in a market economy, we'll talk about this in an article.

Accounting, normal and economic profit

There are three types of financial indicators. Accounting (accounting) profit in the economy - this is what is the difference in the price of products sold and the costs of its production. The remuneration of entrepreneurial activity is called a normal profit, it is the cost of production. And the difference between normal and accounting profit is economic. The real profitability is determined by the main criterion - the value, since the profit in the economy is just the amount of the enterprise's income.

It arises under the condition that the total revenue not only covers, but also exceeds all internal and external costs. This includes the normal profit in the form of interest on capital. Striving for greater profit is an incentive for entrepreneurs to use resources as efficiently as possible, to reduce costs, to master new technological advances, to use scientific potential, to achieve technical progress and to open new production.

Under these conditions, the total amount of income from the listed types of activities also grows, including the main ones, since the profit in the economy is, first of all, the balance growth, which is the total sum from all available types of activity.

How enterprises receive income

The profits from the enterprises are, of course, obtained from the main production. Subsidiary activity brings only some of their part, formed after the performance of non-industrial services - transport, construction, from the work of subsidiary farms and enterprises that sell products. In the same way, income (profit) is replenished by providing paid services to the population.

There is also non-operational activity in almost every enterprise, regardless of its size and significance. It also brings profit.

Calculation of the difference is made between penalties, fines, penalties, that is, the amounts paid and the amounts received: rent from the delivery of their own premises, income from handling tare and the like. This balance and will be considered a profit from non-sales activities.

Financial result of the enterprise

Modern conditions of the crisis, in which all enterprises of the country were put, forced to mobilize all available domestic resources that could, if not increase, at least keep the existing profit at the same level. Calculation and planning of economic activity are now the main components of a successful operation of the enterprise. An enormous role in this is played by analysis that determines the further course of the economic process. Including - the competent identification of ways to use profits.

Profit and its value show all the weak and strong sides of the enterprise, and the analysis of its activities helps to make the best management decision. For this, all economic processes and relations are scrupulously investigated. The financial result of the enterprise, as well as the analysis of ways to generate income, determines the rational ways of structuring the funds and rational use of them. In the same way, the analysis of financial activity is a tool for forecasting both individual indicators and all economic profit in general.

Financial control

Through financial analysis, the movement of cash flows is monitored, and the rationality of the use of profit is verified. The profit should be checked for compliance with the standards and norms for the expenditure of material and financial resources, on the expediency of costs.

Financial analysis has a certain information base - accounting reporting. The results of it operate as internal users (managers and management) and external - creditors, owners, buyers, suppliers, exchanges, consultants, lawyers and even the press.

Of particular importance is the distribution of the company's profit, the study of key parameters, the compilation of an accurate and objective picture of its condition in the financial plan. Such control has its own goals, aimed at studying the methods of financial activity of the enterprise.

Objectives

The main objective pursued by financial analysis is obtaining information about losses and income, the structure, with all its changes in liabilities and assets, settlements with creditors and debtors, as well as the distribution of the company's profits. The analyst or manager in this case is interested in both the current state and the projection for the near or distant future. These are the expected financial condition parameters.

Such goals can be achieved together with the solution of a whole set of specific interrelated tasks. Analytical tasks are to specify all organizational, information, technical, methodological possibilities. Evaluation of the financial performance of the enterprise is always the result of analysis of accounting statements.

Deductive method of analysis

The main principle of analytical reading of reports is deductive - from general to particular - repeatedly applied in the course of analysis. This is how the logical and historical sequence of events and economic factors is reproduced, the direction is revealed, the components of profit and the power of their influence on the overall results of activity are calculated.

Basic Methods

Six basic methods of reading accounting documentation can be distinguished among many existing ones:

1. Horizontal analysis. Under it, each reporting position is compared with the previous period.
2. Vertical. The structure is determined by the final financial indicators and reveals the impact of each reporting position on the overall result.
3. Trend analysis. Each position is compared with a number of previous ones, whereby the trend is determined - the main trend, the dynamics of this indicator, cleared of the randomness of influence and individuality in the features of certain periods. The trend forms quite possible future indicators, thus a long-term forecast is made for the profit of production.
4. Relative indicators and their analysis. This is the calculation of the interaction of individual positions of the report or positions in different forms of reporting that determine their interrelation.
5. The analysis is comparative, on-farm, where separate summary indicators of reporting across the firm, on subsidiaries and divisions are studied. In addition, the inter-farm indicators of this enterprise are compared with those of competitors. So they count on modern enterprises profit in a market economy.
6. Analysis of factors. The influence of individual factors on the outcome indicator is analyzed using stochastic or deterministic methods of research. This type of reading of reports is direct, when the resultant score is broken up into component parts, as well as synthesized (reverse), when the individual elements of the report merge into the overall performance indicator.

External financial analysis

The features of external financial analysis are as follows:

• Its subjects are plural, the information on activity of the company is interested in a large number of users;
• The goals and interests of the subjects of analysis are diverse;
• There are typical methods, accounting and reporting standards;
• The analysis is focused only on external, public reporting;
• Its tasks are limited due to the previous factor;
• The results are open to users wishing to get acquainted with information about the company's activities.

However, there may be underwater currents. If the financial analysis is based only on accounting reporting and looks like an external one, conducted outside the enterprise by the hands of its interested counterparties, government agencies or owners, it still does not allow revealing the secrets of the success of this firm, because the content of external analysis is made up of only certain factors. Components of profit and ways to achieve them usually remain outside the analytical material, only its financial result is known.

Content

The analysis is carried out in a certain way:

1. Absolute profit indicators are analyzed.
2. Relative profitability indicators are considered.
3. The financial condition, market stability, liquidity of the balance sheet, solvency of the given enterprise are checked.
4. The effectiveness of the use of loans is analyzed.
5. The financial condition of the enterprise is diagnosed and the rating of issuers is rated by rating.

Internal financial analysis

The variety of economic information on the activities of enterprises is really great, and there are many ways to analyze it. The data of financial statements and the analysis performed on their basis are called the classical method. Internal economic analysis of finance is the main source of information, supplemented by other data from system accounting, data on production training, regulatory and planning information, and so on.

The main importance of this information is in the optimization of management. For example, analysis of the advance of capital and its effectiveness, the relationship between costs, profits and turnover is required. Internal management analysis is deepened in the data of production accounting for the purpose of conducting a comprehensive assessment of the economy and the study of all economic activities - whether its effectiveness is high.

Features of management analysis:

• The results are focused on their own guidance;
• All sources of information are used;
• Can not be regulated from the outside;
• Full complex in conducting, studying of all activity of the enterprise;
• Accounting, analysis, planning and decision-making are integrated;
• The results are maximally closed for compliance with trade secrets.

Profit analysis

Activity of the enterprise on financial results is reflected in the whole system of indicators that make up profit. Systemic consideration of them presents a certain difficulty, since most of the indicators characterize not only the financial result, but have many differences in purpose. The choice for participants of commodity exchange is difficult because the requirements for information relating to the real state of the enterprise are often not met. Administration is primarily interested in the mass and structure of the profits received, as well as the factors that affected its magnitude. Taxes want to receive information, as reliable as possible, about the book profit, which includes the sale of products, income after the sale of property and much more from the same series.

Hence, the analysis of the components of profit in the economy is not an abstract, but a very specific analysis that helps to develop a strategy of behavior aimed at minimizing losses, financial risks, and so on. Here, first of all, we study such elements of the enterprise as changes in indicators - each for the given analyzed period - their structure and changes are studied, the dynamics of changes for a number of reporting periods (naturally, in a generalized form) are studied.

Remaining at the disposal of the enterprise net profit - the funds after the payment of all taxes and deductions - is spent, as a rule, on the needs of the enterprise itself, and here a detailed analysis is especially needed. This is an expansion of production, and an increase in spending on non-production needs, and environmental protection, and training, and the creation of social funds.