Profitability of fixed assets - an indicator of the effectiveness of their use

The main activity of an enterprise in the general case is a labor process, consisting in a certain impact on the subject of labor through the means of labor. On the scale of the enterprise, this property forms production assets. It is clear that it is necessary to use this property as efficiently as possible. The level of this efficiency can be assessed using indicators that characterize the profitability of funds.

As already noted, production assets are heterogeneous in composition. In this regard, they are divided into basic and negotiable. Let us dwell on how to determine the profitability of fixed assets. In this there is nothing complicated, since the principle of calculating all the indicators of profitability is the same: the ratio of profit to the value of what the profitability of which is to be determined is determined. Accordingly, in this particular case, the value of fixed assets should be used in calculations. It is quite obvious that it can change over time. To more accurately account for these changes, it is necessary to use the average cost for the period for which the profitability of fixed assets is calculated.

In terms of profit, it should be said that profit from sales usually participates in the calculation. This choice is based on the fact that this type of profit characterizes the result only from the main activity, without experiencing the influence of other expenses and incomes.

The profitability of fixed assets shows how effectively they are used. The specific numerical value of the indicator reflects how many units of profit each unit of value of property attributed to fixed assets brings. Obviously, the higher this indicator, the better for the enterprise. This causes the lack of indicators of profitability of regulatory values.

For the second part of production assets - negotiable - you can also calculate profitability. The principle of calculation is completely identical, the profit from sales and the average cost for the period of this property are also used. The economic meaning is also similar and is how much profit can the funds invested in working capital funds bring.

The total value of production assets can also be estimated from the point of view of the liquidity indicator, but there is no point in dwelling on this in detail, since the calculation is similar to the previous indicators. More attention should be paid to determining the profitability of all property, that is, assets. The difference is that the profit is usually used net. This is due to the fact that the amount of assets includes all property, including that which causes other income and expenses. In some cases, you can find a calculation based on profit before tax, which allows you to slightly overestimate the profitability.

As for the next analysis, the profitability of fixed assets, and all other similar indicators should be considered in dynamics. This allows us to judge whether the efficiency of the use of the enterprise's resources is growing, is decreasing or remains at the same level. Of course, to carry out such an analysis, it is necessary to calculate the coefficients for several years, and then determine the relative and absolute changes. If there is an opportunity and access to information, then you can compare with similar indicators of similar enterprises. A more complex method of analysis, but also more effective, is the conduct of factor analysis. Using it, you can identify what has a greater impact on growth or lower profitability. In the future, based on the results of this analysis, these or other management decisions can be made.