Profitability level of unprofitability of core activities. Calculation of profitability of core activities according to the income statement

The economic essence of profitability is that it shows the amount of profit received per ruble of costs. Depending on what indicators are used in the calculations, several profitability indicators are distinguished. The numerator usually contains one of three values: profit from sales (PR), balance sheet profit (PB) or net profit (NP). The denominator is one of the following indicators: production costs of sold products, production assets, gross income, equity, etc.

Profitability of production is the ratio of book profit to the average cost of production assets. This indicator characterizes the amount of profit per ruble of the cost of production assets. Calculated using the formula:

R etc = , Where

R etc– production profitability;

PB – balance sheet profit;

PF– average cost of production assets (fixed and working capital).

Profitability of core activities– the ratio of profit from sales to production costs of sold products (works, services). This indicator allows you to judge how much profit each ruble of production costs generates. Calculated using the formula:

R basic d . = , Where R basic d. – profitability of core activities;

ETC– profit from sales;

Zpr – production costs of sold products.

Return on total costs is defined as the ratio of net profit to the average cost of production assets (fixed and working capital), as well as the maintenance of employees. This coefficient shows the amount of profit per unit cost of total resources. Calculated using the formula:

R zs = , Where R zs– profitability of total costs;

IF – net profit ;

PF– average cost of production assets (fixed and working capital);

Payroll– costs of maintaining employees (wage fund).

Product profitability– the ratio of profit from sales of products to revenue from sales as a whole. Shows how much profit each ruble of the cost of products sold gives. Calculated using the formula:

R prod= , where

R prod– product profitability;

ETC - profit from sales;

RP – sales revenue in general.

Profitability of individual products– the ratio of profit from the sale of a particular type of product to the revenue from its sale. Calculated using the formula:

R ed.= , where

R ed.– profitability of individual products;

P ed. – profit from the sale of a specific type of product;

RP ed. – revenue from the sale of a specific type of product.

In countries with a market economy, the return on investment (capital) is calculated to characterize the return on investment in a particular type of activity. This indicator can be calculated from the perspective of the interests of various groups: owners, investors, enterprise, etc.

Investors (owners and lenders) are the main providers of capital to the enterprise. Their total income is net profit and interest payable. This total return can be compared either to total assets or to long-term capital; in the first case, a coefficient is calculated, known as return on assets, in the second - return on invested capital:

R A = ;

R And = , Where

R A – return on assets;

R And– profitability invested capital;

IF- net profit (profit to be distributed among owners);

VP- Percentage to be paid;

SSA- average annual value of assets;

SK- equity;

BEFORE- long term duties.

Index return on assets assesses the effectiveness of investing funds in the assets of a given enterprise; in other words, the correctness of the choice of this particular investment is assessed (in particular, we are talking about the industry of the enterprise). Index return on invested capital characterizes the assessment of the effectiveness and feasibility of the relationship between investors and the enterprise they created - it evaluates the return on long-term capital.

The most common financial indicator for assessing the feasibility of investments from the position of the owners of the enterprise is the indicator return on equity:

R ck = , where

R sk – return on equity;

SSK– average annual cost of equity capital.

The considered indicators are supplemented by return on sales ratios. Various algorithms for their calculation are possible depending on which profit indicator is used as the basis for the calculations, but most often gross, operating (earnings before interest and taxes) or net profit are used. Accordingly, three indicators of return on sales are calculated:

(a) gross profit rate, or gross profitability of products sold (R

; (b) operating profit margin, or operating profitability of products sold (R

); (c) net profit rate, or net profitability of products sold ( R h ).

A)

R

shaft

= =

b)

R

op

= ,

V)

R

h

=

,

ETC

– profit from sales;

PSA– cost of products sold;

RO – operating expenses (excluding interest payable and taxes)

IF – net profit.

Analysis of profit and profitability of the work of Dedal LLC

The main activities of the Daedalus company are: production of plastering works, installation of metal building structures, as well as their dismantling. The company provides a full range of services in the field of climate control technology: individual and industrial design of air conditioning, ventilation, heating and water supply systems, engineering services, express analysis of facility parameters, drawing up specifications, electrical installation and commissioning of all offered equipment of any complexity category, service and warranty service in the field of domestic and industrial air conditioning, ventilation and heating.

The company has been operating on the Russian market since 1996. Experience in providing professional services determines the company's reputation and its responsibility to customers.

The sources of financing the company's working capital are its own funds and accounts payable. The policy of Dedal LLC for financing working capital is to ensure the effective use of equity capital and the financial stability of the company (see Appendix B). The main factor that entails a change in the working capital financing policy is the reduction in the volume of work due to the global financial crisis.

Based on the results of work in 2012, there was a decrease in the main financial and economic indicators. The amount of net profit in 2012 compared to 2011 decreased by 52.1% and amounted to 1,655,600 rubles. instead of 2517400 rub. The average equity capital also decreased from RUB 9,719,700. up to 7668400 rub.

Factors that influenced the change in revenue from core activities over the past 4 years, as well as an assessment of their impact on profit indicators, are presented in Table 3 (see Appendix D). The table shows that the main influence is exerted by an increase (decrease) in the volume of work. Thus, the decrease in the amount of profit in 2012 compared to 2011 is justified precisely by the decrease in the volume of work. Customers began to refuse to carry out construction and repair work altogether or reduce their volume to a minimum due to the global financial crisis. This implies the impact on profit of another factor - the general economic situation in the country. The influence of this factor increased 5 times in 2012.

The indicator characterizes the share of profit (loss) received by the organization in its core activities.

That is, it shows the share of profit (loss) from the main activity in revenue.

Calculation formula (according to reporting)

Line 2200 / line 2110 of the income statement * 100%

Standard

Not standardized

Conclusions about what a change in indicator means

If the indicator is higher than normal

Not standardized

If the indicator is below normal

Not standardized

If the indicator increases

Positive factor

If the indicator decreases

Negative factor

Notes

The indicator in the article is considered from the point of view not of accounting, but of financial management. Therefore, sometimes it can be defined differently. It depends on the author's approach.

In most cases, universities accept any definition option, since deviations according to different approaches and formulas are usually within a maximum of a few percent.

The indicator is considered in the main free service and some other services

If you see any inaccuracy or typo, please also indicate this in the comment. I try to write as simply as possible, but if something is still not clear, questions and clarifications can be written in the comments to any article on the site.

Best regards, Alexander Krylov,

The financial analysis:

• Definition Net profitability is an indicator characterizing the ratio of net profit (loss) to revenue. It describes the final (net) performance of the organization. The indicator reflects the share of net profit...
• Definition Return on sales is an indicator characterizing the level of gross profit (loss) in revenue. It describes the basic performance of an organization. It can be considered the markup level of the enterprise...
• Definition Economic return on assets is an indicator reflecting the ratio of profit (loss) from sales to assets. That is, this indicator indicates what level of effect...
• Definition Retained earnings (uncovered loss) 1370 is the amount of retained earnings or uncovered loss of an organization. It is equal to the amount of net profit (net loss) of the reporting period, i.e....
• Definition Profit (loss) from sales 2200 is the gross profit (loss) of the enterprise (line 2100) minus sales expenses (line 2210) and general business expenses (line ...
• Definition Profit (loss) before tax 2300 is the difference between all the organization’s income (from core activities and from other activities) and all its expenses, but...
• Definition Borrowed funds 1410 are long-term (for a period of more than 12 months) loans and borrowings received by an organization. An organization can transfer reporting to short-term reporting when the deadline...
• Definition Deferred tax assets 1180 are an asset that will reduce income taxes in future periods, thereby increasing after-tax profits. The presence of such an asset...
• Definition Other 2460 - these are other indicators that influence the amount of the organization’s net profit: taxes paid when applying special tax regimes, penalties and fines, surcharges for...
• Definition BALANCE 1600 is the sum of indicators on lines 1100 and 1200, that is, the sum of non-current and current assets. These are all the assets that a company uses...

Indicators characterizing the profitability of an enterprise, that is, profitability indicators, reflect how effectively the organization uses its funds to make a profit. Profitability analysis consists of studying the levels and dynamics of profitability ratios, which are relative indicators of the financial performance of organizations.

The return on total assets indicator serves as a measure of the efficiency of using the organization's funds, that is, how much income is received per unit of assets. If the value of this indicator is less than the interest rate on loans, then the situation should be considered unfavorable.

Calculation of profitability indicators for a more complete and detailed analysis is recommended to be calculated using both gross and net profit.

Return on assets indicators are formed under the influence of turnover rate and profitability of sales. The factor model has the form:

Ra = Rп * Ko

where Rп - return on sales,

Ko - asset turnover ratio.

Based on this basic DuPont model for return on assets, all indicators of enterprise profitability are modeled. For example, return on equity is formed under the influence of return on sales, financial agility and turnover rate:

Rsk = Kfm * Rp * Kob

where Kfm is the coefficient of financial maneuverability,

Rп - return on sales,

Ko - turnover ratio.

At the end of the analysis, it is advisable to evaluate the indicators characterizing the effectiveness of their work. To do this, it is necessary to use a system of indicators that each individually would express one or another aspect of efficiency, and taken together would give its full characteristics.

The general principle of constructing economic efficiency indicators is to compare performance results with indicators of material, labor and financial resources (resource approach) or with indicators of current costs to achieve these results (cost approach). There is a close connection between the resource and cost types of efficiency indicators: increasing the efficiency of resource use reduces the total amount of current costs (distribution costs), and increasing the efficiency of current costs allows one-time costs (resources) to be released.

The resource approach includes the following indicators:

1. Profitability of resources (Рр).

where P is the amount of profit;

Average annual cost of fixed assets;

Average annual cost of working capital;

ZP - the amount of wages of employees.

The indicator characterizes the effectiveness of economic potential. Based on the study of resource efficiency levels over time, it is possible to identify the main trends in changes in the efficiency of their use.

2. Resource efficiency (P 0).

where B is the amount of revenue.

The resource approach to evaluating efficiency also involves studying the efficiency of using each type of resource (fixed assets, working capital, labor resources).

3. Resource intensity (Re)

Resource intensity shows the amount of resources per 1 ruble of revenue from sales of products, goods, works, and services.

The value of the total resource intensity can be presented as the sum:

where is capital intensity,

Material consumption,

Labor intensity.

The cost approach to evaluating efficiency differs from the resource approach in that the comparison is made with costs and expenses. A common measure of efficiency is the cost-effectiveness ratio.

The cost approach includes the following indicators:

1. Profitability of current costs (Ri):

where P is profit,

And - the amount of costs.

2. Cost-effectiveness (Z o):

where B is sales revenue,

3. Cost intensity (Ze):

The increase in cost intensity should be lower than cost return.

Shows the amount of costs per 1 ruble of sales revenue. A decrease in the value of this indicator is a positive trend.

4. Return on costs of fixed assets (RZof):

where R of - expenses associated with the operation of fixed assets.

5. Return on working capital (ROC):

where R os - working capital expenses.

The higher the indicators, the more efficiently fixed assets are used. The same can be said about the profitability of working capital costs.

6. Profitability of labor (RZ salary):

where Р зп - expenses for wages of employees.

Typically, an increase in this indicator is assessed positively.

7. Cost efficiency of fixed assets (Z of).

8. Cost efficiency of working capital (Zos):

9. Cost efficiency of wages (Ззn):

The increase in these indicators over time is a positive trend.

Thus, the coefficients represent relative measures of efficiency. Their analysis consists of comparison with standard values, as well as studying their dynamics over the reporting period and a number of years. In addition to indicators for assessing economic efficiency, organizations should conduct a comprehensive analysis of their financial condition.

Any enterprise in the process of economic activity strives to make a profit from its activities. The ideal formula for any business would be to get as much income as possible and spend a minimum of resources on it.

What is used for assessment?

To evaluate the activities of an enterprise, a variety of economic and financial indicators are used: cost of production, profitability ratio, sales margin, cash turnover, capital flow, and many others. Each such indicator has its own calculation method, for example, to determine profitability, the profitability formula for the main activity of the enterprise is used.

Profitability of production and enterprise

The term “profitability” itself has German roots and means “profitability.” By assessing profitability, one can draw conclusions about the efficiency of using funds in an enterprise. But how to calculate production profitability?

This indicator determines the profit that the manufacturer received per unit of its costs. That is, for example, if the profitability is 20%, then the enterprise received 20 rubles of profit for every ruble that was spent on goods or provision of services. The lower the profitability, the less the company earns from one conventional unit of production. These theses are confirmed by the profitability formula for the main activities of the enterprise.

Profitability ratios are also called profitability ratios. In fact, it is possible to determine the efficiency and quality of management at an enterprise by calculating the profitability of the enterprise's core activities. The formula for calculation is given later in the article. If they are not used rationally, profitability will decrease. And with the efficient and economical use of raw materials and other valuables, it will grow.

The production profitability formula will help you find out the level of profitability, by which you can judge whether it is profitable to engage in such activities or whether production needs to be repurposed in another direction. In other words, with the help of mathematics it is possible to justify the feasibility or unprofitability of conducting a particular type of activity.

Profitability calculation

The formula for the profitability of the main activity of an enterprise, which will show the result in the form of percentages, is as follows:

R main = ((Profit from operating activities) / (Cost of production + + Administrative expenses)) * 100%,

• Profit from core activities = (Enterprise income from core activities) - (Cost of production + General production expenses + Administrative expenses).
• The cost of production is the direct costs of conducting activities (wages and salaries of workers who are directly involved in the production process, costs of purchasing and delivering raw materials, materials that are consumed in production, etc.).
• General production expenses - include costs for electricity, utilities, paper, cleaning services, wages for personnel who are not directly related to the production process, but are employed in servicing business processes (secretaries, technicians, cleaners, security guards and others), as well as other costs that cannot be classified as direct.
• Administrative expenses are the costs of maintaining administrative and management personnel, holding meetings and conferences, rewarding employees for high achievements, holding sports competitions and other events, traveling to various conferences for directors, as well as other costs incurred by the enterprise to organize the production process.

In order to see the coefficient, the profitability formula for the main activity of the enterprise is calculated without multiplying by 100%.

In principle, this calculation is also suitable for other types of profitability, only with some modifications. So, for example, the formula for production profitability is as follows:

P pr. = ((Profit from the sale of goods) / (Cost of production of goods + General production costs for the production of goods + Administrative expenses for the production of goods)) * 100%.

What level of profitability is considered normal?

The first step is to consider the main values ​​of the profitability indicator. The profitability of core activities, the calculation formula for which is given above, can take on a variety of values. If the coefficient is below zero, then this shows that the company spends more money on the production of goods or services than it later earns from their sale.

A coefficient equal to 0 indicates that the company does not make a profit, but also does not incur financial losses from its activities.

If profitability is above 0, then the company is operating at a profit.

It is necessary to take into account that different areas of business have their own acceptable profitability of the main activity, the calculation formula of which indicates this. There are industries in which it is necessary to cover the risks that manufacturers encounter in certain areas of their activities.

Russia is no exception. At enterprises that engage in different activities, profitability indicators can differ dramatically. However, a company with lower profitability will not always be less successful. There are a number of reasons for this related to capital turnover and other features of the functioning of enterprises in various sectors of the economy.

Normal profitability in the field of building materials and other production

Thus, in the construction materials production industries, as well as in those that have high transportation potential to other countries, the average profitability indicators are at the following level:

• operation of oil and gas pipelines (80-90%);
• production of cement products (80-85%);
• fertilizer production (80-85%);
• production and processing of non-ferrous metals (60-65%);
• production of rolled metal products (35-40%).

Normal profitability in banking

In the field of banking services and for financial institutions, the following indicators are observed in the Russian Federation:

• clearing services (65-70%);
• servicing trading in financial markets (55-60%);
• maintenance of registers on the securities market (40-45%).

Normal profitability of goods consumed by humans

The production of goods that are consumed by the population has the following profitability indicators:

• manufacturing of tobacco products (40-42%);
• brewing (25-30%);
• production of household appliances (20-25%).

Pitfalls of profitability indicator

Despite the fact that the formula for the profitability of the main activity of an enterprise is quite simple and understandable, one cannot look at the final indicator straightforwardly.

There are many methods for analyzing profitability, which characterizes the wide range of different types of its indicators.

First of all, it is important to evaluate and compare sales volumes of different periods, as well as track those periods. It often happens when a good and promising business becomes unprofitable precisely because of an incorrect approach to assessing the required volumes of production and sales of goods and services.

For example, a manufacturer of any product wanted to increase the profit of the enterprise not by reducing the level of production costs, but by increasing the volume of output.

The formula for the profitability of production at the output will show that profitability can drop significantly or even be negative. What is this connected with? There are many factors. There is always the possibility of loss of sales markets or their volume insufficiency. Relations with sellers may deteriorate, or the market simply does not need the volume of products produced, since demand is limited. In simple words, if there is no one to sell the product, then why should it not be produced? In case of excess production, the goods will simply lie in warehouses and spoil.

You should also consider the rate of capital turnover. For the first example, you need to analyze the time frame between the initial purchase of raw materials and the point when money was received for the manufactured products. This will be a full production cycle. The profitability of producing 1 product can be, for example, 50%. If there is a long period of product turnover, and the volume of production is limited, then in reality the profit may be too small to pay all current expenses. That is, a profitability mark of 50% may not at all indicate the success of the enterprise, but will simply characterize the specifics of the industry and production methods.

How to correctly use the production profitability indicator?

Of course, production profitability is one of the most important indicators by which one can analyze the efficiency of an enterprise and draw any conclusions about the production process itself.

When analyzing the activities of any enterprise, it will not be enough to simply know how to calculate the profitability of the main activity; you need to remember about other indicators, as well as various ones. It is impossible to extract profitability from the whole system of indicators in which it is included. This includes financial stability, liquidity, solvency, etc. In addition, it is necessary to carry out a vertical balance sheet of the enterprise, use financial indicators such as capital turnover, asset movement.

Only in this case can you fully assess the profitability indicator, determine the prerequisites for this level and ways to effectively increase it.