Profitability of production assets - an indicator of production efficiency

Any labor activity is characterized by the fact that with the help of means of labor one or another effect on the object of labor is produced. With reference to the production activity of an enterprise, the totality of means and objects of labor is the value of production assets. This is the part of the property that is directly involved in production. This reason causes the special importance of determining the degree of efficiency of the use of this part of assets.

The easiest way is to use the most popular method for assessing efficiency, so we'll look at how to calculate the profitability of productive assets. In general, profitability indicators are determined through the ratio of profit to that indicator, the profitability of which must be known. As for our situation, the profitability of production assets is determined by dividing the profit from sales by the average value of production assets.

It is necessary to clarify the choice of these indicators. Let's start with the numerator, in which we used the profit from sales. Of course, we could go the easy way and use the amount of net profit, as in most profitability indicators, but this would not be very correct. The fact is that the net profit takes into account also the financial result from other activities in which the production funds do not take part. But the indicator of profit from sales just does characterize the useful effect of selling pre-manufactured products.

As for the denominator, it is important to explain the use of the average value. This choice is due to the fact that profit is accumulated over the period of the indicator, and during this period the value of the property could change. In order to some extent to smooth out the impact of these changes, the average value is used in the calculations. Such a calculation will be most accurate and correct, but it requires additional information and additional labor costs. If there are no such resources, then the cost of production assets can be used at the end of the period, but this may reduce the accuracy.

As already noted, the profitability of production assets shows the effectiveness of their use. As for the meaning of specific numerical values, it consists in the amount of profit that accounts for each ruble of the value of this part of the assets. Obviously, the larger this value, the more efficiently the company's resources are used.

Production assets of the organization are divided into two fundamentally different groups: basic and negotiable. Each of these parts represents the means and objects of labor, respectively. In relation to these parts, you can also calculate profitability by an identical method. Note that the cost is also better to use the average over the period to make the calculations more accurate.

The profitability of production assets is not only to be determined, but also to be analyzed. The methods of analysis in this case are similar to other indicators of profitability. It will be enough to analyze the dynamics of the indicator for several periods (to carry out a horizontal analysis) and compare the values with the industry average or with the levels of the analogical enterprises. In addition, you can resort to factor analysis, which will determine the causes of these or other changes. For this type of analysis, DuPont experts and the corresponding formulas are often used, but nothing prevents you from applying other mathematical models, which, in your opinion, will more accurately reflect the current situation.