Profitability of production activities

Profitability production activities - characterizes the payback of production costs, shows how much profit the company has from each ruble spent on the production and sale of products.

Analysis of the profitability of production activities is carried out in the program FinEkAnalysis in the block Analysis of the use of capital as Profitability of products.

Profitability of production activity formula

Profitability of production activities \u003d Profit from sales / Cost of goods sold, products and services

The level of profitability of production activities depends on three main factors:

• from changing the structure products sold. Increase in specific gravity over profitable types products in the total amount of production contributes to an increase in the level of profitability of products;
• a change in the cost of production has an inverse effect on the level of profitability of products;
• change in the average level of selling prices. This factor has a direct impact on the level of product profitability.

Synonyms

product profitability, cost recovery ratio

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What else was found about the term Profitability of production activities

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effect financial leverage. also decreased profitability total invested capital (by 10.76% in 2011 and by 4.71% in 2012). This means that if the enterprise is sufficiently provided with financial resources, there are reserves for a more intensive use of invested funds. It should be noted that the return on capital depends both on the intensity production- marketing activities, and on the proportions of the distribution of financial resources according to the forms of functioning ...

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10. The need for the development of management accounting at the present stage

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11. Financial ratios - profitability of the enterprise

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When an entrepreneur decides to open own business, he may not think about how profitable this business will be. Of course, a person is aware that he will receive income, but the timing in which this will happen is important. Remember that when starting a business, good judgment matters a lot. This is especially true for such an indicator as payback. Do you want to know how it can be calculated?

Important information

Of course, in order for the store to pay off, it must necessarily make a profit. The greater the amount of profit relative to the initial costs of starting a business, the shorter the payback period of the enterprise. Remember that payback is more important than profit. It is he who generally characterizes the degree of success of your business.

A few words about what payback period can be considered acceptable? Much depends on how much you are willing to invest in business development. Each businessman relates to the payback period in his own way. For someone, 5-10 years is normal, but someone wants to quickly pay off all debts and start earning. But before you calculate the payback of the store, it is worth remembering that small outlets differ in that they pay off much faster than large stores. All this is explained, again, by the amount of investment in the business - a large supermarket will take more money. In turn, experts say that a payback period of 1 year can be considered normal. During this time, it is possible to minimize the risks associated with relations with third parties, in particular, eliminate competitors, avoid changes in legislation, etc.

Methodology for calculating payback

It would be more correct to start calculating the payback of the business, taking into account the costs of opening it. Let's take an ordinary store - how long will it pay off? It is believed that in order to open it, you need to spend money on the purchase of goods and equipment. Naturally, staff salaries, rent, taxes - all this is important. However, it is more correct if you take them into account in operating costs, subtracting them from income and getting net profit.

Calculate the monthly profit of the store. Now divide the costs by the profit that you plan to receive every month, as a result of which you will receive desired value payback.

Plan your activity, and it will definitely be successful!

Profitability of production - the most important economic indicator. What it means and how it is calculated, read in this article.

Why is profitability calculated?

The desired result of the activity of each enterprise is profit. However, profit in absolute terms (in rubles, thousands or millions) is just a figure in the income statement. financial results. For the owner or investor, of course, it is important, but not informative enough. In order to understand how hard this profit is received, there are relative indicators of profitability, called profitability indicators. One of them - profitability of production.

Profitability of production correlates the amount of profit received with the amount of funds that allowed it to be received, shows the amount of profit per 1 rub. spent production funds. The fewer funds used to obtain a certain amount of profit, the higher profitability of production, which means higher efficiency of the company.

For other profitability indicators, read our articles:

Production profitability formula

Profitability of production is an attitude total amount arrived ( book profit) to average annual cost fixed and working capital.

Calculation formula profitability of production has the following form:

Rprod \u003d Pr / (OF + ObS) × 100,

Rprod — profitability of production;

OF - the average cost of fixed production assets for the billing period;

obs - average cost working capital.

Where to get numbers for calculation

Information for calculation profitability of production taken partly from financial reporting and partly from accounting analytics.

So, we get the amount of balance sheet profit from the income statement - from line 2300 "Profit (loss) before tax" of Form 2.

Read more about this report in the article. .

The data for the denominator of the fraction, most likely, will have to be sought in analytical accounting registers. Taking numbers from the balance is unlikely to succeed. For example, because it reflects the aggregate data on the fixed assets of the enterprise, and for the calculation profitability of production we need the rest of the productive assets. This means that detailed information about the OS is needed.

Profitability of production, profitability of products and profitability of sales - is there a difference?

Certainly there is. This certain types profitability, three independent indicators. It has already been said above that profitability of production shows the share of profit per 1 rub. spent production funds.

In turn, the profitability of products demonstrates the amount of profit per 1 rub. cost (full or production). It is calculated by the formula:

Rpr \u003d Pr / Ss × 100,

where: Rpr - product profitability;

Pr - profit;

SS - cost.

As for the profitability of sales (it is also called the overall profitability), it carries information about the amount of profit per 1 rub. revenue. It is calculated according to the formula:

ROS = Pr / Op × 100%,

where: ROS - profitability of sales;

Pr - profit;

Op - sales volume or revenue.

As you can see, the indicators really differ both in meaning and in calculation. And they should not be confused.