Levels of profitability and their definition
Levels of profitability of an individual productare calculated taking as a basis the ratio of the profit received per unit of the product to the corresponding cost price. In this case, the profit on the product is calculated by finding the difference between its price (wholesale) and cost.
The level of overall profitability can be determinedin the form of the ratio of profit (balance sheet) to the average value of fixed assets involved in the production process, as well as working capital, calculated on the basis of accepted norms. In other words, it can be confidently asserted that this indicator is an indicator reflecting the growth of the total amount of invested assets (capital).
The analysis of the level of profitability lies at the basis ofcalculations of development prospects of the business entity, based on its economic indicators. However, such calculations should be supplemented by two key indicators, such as the profitability of the number of capital turnover and total turnover.
The number of capital turnover is the ratio of revenueof the analyzed subject to the sum of its capital. At the same time, it is considered that the greater the amount of the company's gross proceeds, the greater the number of its capital turnover.
The indicator of profitability of turnover is reflecteddependence between the gross turnover of the business entity and its costs (costs). It should be noted that the higher the profit level in comparison with the company's total revenue, the profitability of turnover has better indicators.
Based on practical economic calculations,it is necessary to note a large number of factors that reflect both external and internal influences. At the same time, external factors include factors that do not depend on the work of the collective of the enterprise (for example, prices for materials, transportation tariffs and depreciation rates). These measures are carried out on a general scale and have a significant impact on the overall results of economic and financial activities of the business entity. Changes in the product mix structure affect the volumes of finished products sold, as well as profitability and production costs.
The main task of economic analysis istimely detection of the negative impact of external factors, as well as determining the amount of profit that can be obtained due to the impact of internal factors. In this case, you can not do without calculating the efficiency of using all production resources.