Profitability of sales by ebit standard value. Profitability - what it is, types and formulas, how to calculate and increase profitability. About the parameter of enterprise efficiency
It is obtained by dividing the profit from the sale of products by the amount of the proceeds received. The initial data for its calculation is the balance sheet.
It is calculated in the FinEcAnalysis program in the Profitability Analysis section as Profitability of sales.
Profitability of sales - what shows
Shows how much profit the company receives from each ruble of products sold.
Profitability of sales - formula
The general formula for calculating the coefficient:
Calculation formula according to the old balance sheet:
| Krp = | p.050 | *100% |
| p.010 |
where p. 050 and p. 010 of the income statement (form No. 2).
Calculation formula according to the new balance sheet:
Return on sales - value
It is used as the main indicator for evaluating the financial performance of companies with relatively small amounts of fixed assets and equity. Evaluation of profitability of sales provides an opportunity to objectively look at the state of affairs.
The indicator of profitability of sales characterizes the main aspect of the company's work - the sale of the main products.
Profitability of sales - scheme
1. Increase in the indicator.
a) Revenue growth is outpacing cost growth. Possible reasons:
- sales growth,
- change in sales mix.
With an increase in the number of products sold in physical terms, revenue increases faster than costs as a result of production leverage.
The components of the cost of production are variable and fixed costs. Changing the cost structure can greatly affect the amount of profit. Investing in fixed assets is accompanied by an increase in fixed costs and, theoretically, a decrease in variable costs. At the same time, the dependence is non-linear, so finding the optimal combination of fixed and variable costs is not easy.
In addition to simply raising the price of its products, a company can increase revenue by changing its product mix. This development trend of the enterprise is favorable.
b) The rate of cost reduction is outpacing the rate of revenue decline. Possible reasons:
- rise in prices for products (works, services),
- changing the structure of the assortment.
In this case, there is a formal improvement in the profitability indicator, but the volume of revenue decreases, the trend cannot be called unambiguously favorable. For correctly drawn conclusions, they analyze the pricing policy and the assortment policy of the enterprise.
c) Revenue increases, costs decrease. Possible reasons:
- price increase,
- change in the range of sales,
- change in cost rates.
This trend is favorable, and further analysis is carried out to assess the sustainability of this position of the company.
2. Decrease in the indicator.
a) Cost growth is outpacing revenue growth. Possible reasons:
- inflationary growth in costs outstrips revenue,
- price reduction,
- changing the structure of the sales assortment,
- increase in cost rates.
This is an unfavorable trend. To remedy the situation, they analyze pricing issues at the enterprise, assortment policy, and a cost control system.
b) The rate of revenue decline outpaces the rate of cost reduction. Possible reasons:
- reduction in sales.
This situation is common when the company reduces the activity in the market. Revenue declines faster than costs as a result of operating leverage. An analysis of the company's marketing policy should be made.
c) Revenue goes down, costs go up. Possible reasons:
- price reduction,
- increase in cost rates,
- change in the structure of the sales assortment.
It is necessary to analyze pricing, cost control systems, assortment policy.
Under normal (stable) market conditions, the dynamics of revenue changes faster than costs only under the influence of production leverage. The remaining cases are associated either with changes in the external and internal conditions of the enterprise's functioning (inflation, competition, demand, cost structure), or with an inefficient system of accounting and control in production.
Was the page helpful?
Synonyms
More found about return on sales
- Analysis of the profitability of the main activity of a trade organization It characterizes the efficiency of entrepreneurial activity How much profit an organization has from one ruble of sales Profitability of sales is defined as the ratio of profit from sales or net profit to the amount received
- Analysis of the current level, features and trends of profitability indicators of Russian joint-stock companies
- Return on sales based on profit before tax Return on sales Return on sales based on profit before tax - which shows Return on sales based on profit before tax
- Profitability of sales ratio Synonyms profitability of sales profitability of sold products profitability of sales based on profit before tax
- Evaluation of the influence of factors on profitability indicators Or if you try on the method of reducing the numerator and denominator divided by revenue, then you can use the following factorial model profitability of sales multiplied by the turnover ratio of current assets Profit from sales multiplied by the turnover ratio
- Total return on sales Total return on sales Total return on sales - definition Total return on sales - a ratio equal to the ratio of book profit
- Low profitability threshold and on-site inspections Profitability indicators can be divided into two groups: return on sales return on assets Return on sales is a profitability ratio that shows the share of profit in each
- Profitability of sold products Synonyms profitability of sales profitability of sales ratio profitability of sales in terms of profit before tax is calculated in the FinEcAnalysis program in the Profitability analysis block
- Analysis of financial assets according to NROSEBIFA consolidated financial statements - net return on sales in terms of profit before interest and before income expenses from financial assets
- Formation of a scoring model for assessing the creditworthiness of a corporate borrower EBIT Interest 0.0790 4 > 1.5 4 1.3-1.5 3 1-1.3 2< 1 0 Рентабельность продаж ROS 0,1256 6 > 0,025 6 0,02-0,025 5 0,015-0,02 3 < 0,015 0
- Pre-audit analysis as a tool for predicting field tax audit of penal institutions and its improvement Profitability of sales % Profitability of assets % Profitability of sales % Profitability of assets % Garment production 7.1 3.5
- Factor analysis of the formation and use of the company's profit Profitability of sold products profitability of sales is calculated by the formula
- Factor analysis of the financial performance of agricultural producers The influence of factors on the profitability of sales or the profitability of the main activity can be assessed by the method of chain substitutions Substitutions Factor rub Product profitability
- Features of the financial policy of companies in a crisis ROS - net profitability of sales in terms of profit before interest kic - turnover ratio of invested capital In the index
- Anti-crisis management of the financial and economic stability of an industrial enterprise
- Key aspects of profit management of an organization The following groups of profitability indicators can be distinguished: profitability of assets with a breakdown into non-current current and net assets; return on capital of the total debt; return on sales; return on expenses
- Forecast balance taking into account current trends, forecast volumes and profitability of sales, changes in non-current assets FinEkAnalysis you can quickly build a forecast balance taking into account existing trends in forecast volumes and profitability of sales changes in non-current assets An example of a report automatically generated by the FinEkAnalysis program
Profitability of sales (Return On Sales, ROS) is an indicator of sales efficiency, a tool for controlling prices and costs. There are several formulas for calculating ROS. Read on, which formula to choose, how to analyze the data obtained. And also download a report that will help you control the profitability of sales.
What is return on sales
The formula for return on sales by net profit
Most often, return on sales is calculated by net income (ROS).
Net Sales - proceeds from the sale of products, net of indirect taxes (VAT and excise duty), for the same period.
However, when calculating instead of net profit, you can use:
- gross margin (sometimes isolated as a separate indicator - marginal profitability);
- operating profit;
- earnings before taxes and interest (EBIT);
- profit before taxes.
The choice of the numerator depends on the availability and complexity of obtaining data, the tax burden, and the goals of the analysis.
How to Calculate Operating Margin of Sales from Net Income
The operating profitability of sales in terms of net profit allows you to evaluate the effectiveness of the company's core business. It is determined by the formula:
where R N is the operating margin of sales in terms of net profit,
NPS - net sales profit,
TR - Revenue.
Return on sales formula by balance sheet
RP = line 2200 / line 2110,
where RP is the return on sales,
line 2200 - profit (loss) from sales,
line 2110 - sales revenue.
In this case, the profitability of sales shows the share of profit from sales in the company's revenue.
Economic essence and normative value of the indicator
The profitability ratio of sales shows the share of profit in each ruble of revenue, it allows you to evaluate the effectiveness of sales, to understand how much profit each ruble of revenue will bring.
There are no generally accepted standards for the value of the indicator. You can focus on industry standards or indicators of competitors or similar enterprises. The top management of the company must independently determine the necessary standards, permissible deviations and response schemes for exceeding permissible deviations.
An Excel model that calculates the forecast profitability of sales in 15 minutes
If a company plans to include a new product in its assortment, evaluate the predicted profitability of its sales using a ready-made model in Excel. The experts of "System Financial Director" have developed a model and material that will tell you how to work with this model and how to adapt it to your needs.
Application practice
The indicator is used to analyze companies for comparison with competitors or in dynamics, to compare individual products or product groups, divisions, distribution channels (see more about ).
Analysis of profitability of sales for the company as a whole
If we compare organizations of similar business scale, then the rule is true for them: the lower the share of profit in revenue and, accordingly, the value of ROS, the worse the business is in comparison with a competitor, since there are relatively more expenses in revenue.
Analysis of the indicator for the purposes of assortment policy
Determining the profitability of the company as a whole may show an unfavorable picture, but it will not give a full answer about the necessary actions, a deeper study will be required. Comprehensive information about the causes of inefficiency will allow you to get an analysis in the context of products, product groups and directions.
Analysis for pricing purposes
Analysis of the indicator by product provides the information needed to adjust prices. There is also an additional effect that affects ROS, the scale effect. As sales increase, overheads are spread over more units, which in turn increases ROS across products, product groups, and operating lines. The share of overhead costs decreases, since overhead costs do not change following the growth in sales, while revenue grows, therefore, the value of profitability for the company also grows.
Calculation and analysis example
Suppose that in 2015 the organization made a profit of 10 million rubles, in 2016 the profit decreased to 8 million. At the same time, revenue in 2015 amounted to 120 million rubles, and in 2016 - 110 million rubles. Let's define ROS for two years in Table 1.
Table 1. Calculation of ROS for 2 years
At the end of 2016, ROS decreased by 8.3 - 7.27 = 1.03%, while profit fell by 20%, and revenue only by 8.3%, which indicates an increase in costs for the company as a whole. We noted the deterioration of the result, this is a reason to conduct a deeper study and look at ROS in the context of products (Table 2).
table 2. ROS by products
|
Product "A" |
Change |
||
|---|---|---|---|
|
Profit, million rubles |
|||
|
Revenue, million rubles |
|||
|
Share in the company's profit |
|||
|
Share in the company's revenue |
|
Product "B" |
Changes |
||
|---|---|---|---|
|
Profit, million rubles |
|||
|
Revenue, million rubles |
|||
|
Share in the company's profit |
|||
|
Share in the company's revenue |
A very interesting situation: product "A" - revenue does not change, but profit falls, which leads to a fall in ROS. This is possible if the product is in the “maturity” stage and more and more promotional expenses are required to maintain sales, especially in a situation of unfavorable market conditions.
Product "B" shows a different trend - we have received a large decrease in the absolute values of both profit and revenue, but at the same time ROS is growing. The reason is in proportion: profit fell less than revenue. Probably, despite the drop in sales, the company managed to optimize its costs, for example, the product is new for the company and the “learning” effect is affecting.
A high share of product “A” in revenue gives us a paradoxical result for the organization as a whole, a decrease in profitability for product “A” by 0.5%, with an increase in product “B”, it gives a drop in ROS as a whole by 1%.
In practice, it is possible to deepen the calculation not only in the context of products, but also in the context of managers, sales channels, branches - this will provide more information that is important for decision-making.
There are many ways to measure the performance of an organization. The main one is to calculate the profitability ratio. It is this indicator that should be taken into account first of all by the owner of the enterprise, taking into account that the profitability of a business is determined by the size of the result obtained in relation to the resources expended.
Based on the analysis of the data obtained during the calculation, we can conclude how the business is developing, what are the strengths and weaknesses of the enterprise at the moment, and what actions need to be taken to improve the efficiency of its work.
Dear readers! The article talks about typical ways to solve legal issues, but each case is individual. If you want to know how solve exactly your problem- contact a consultant:
APPLICATIONS AND CALLS ARE ACCEPTED 24/7 and 7 days a week.
It's fast and FOR FREE!
One of the important indicators of the results of sales of products is the profitability of sales, which reflects the net income from sales of the company.
Definition and economic meaning
Before proceeding to the methods of calculating profitability, it is necessary to understand its economic meaning. Profitability shows how efficiently a business uses the resources involved.
In general, profitability is calculated in order to:
- control profits;
- track the dynamics of the business;
- compare the results obtained with those of competitors;
- identify which sales are profitable and which are unprofitable.
In relation to sales, the activity of an enterprise should be determined not only in terms of maximizing revenue, but also in terms of net profit from trade turnover. For this purpose, the profitability ratio of sales is calculated, which shows the efficiency of the sale of goods and allows you to determine the percentage of its cost in the total amount of revenue.
Return on sales, assets and equity
When analyzing the activities of an organization, various profitability ratios are usually considered not separately, but in aggregate.
At the same time, the following profitability ratios are the main indicators of the company's performance:
- assets;
- capital;
- sales.
The indicator shows how much profit is received from the sources involved in production - monetary resources, capital and other resources. To determine the return on assets, you need to divide the net profit by the amount of assets in annual average terms (the sum of the values for the first and last day of the year, divided by 2) and multiply by 100%.
Return on assets values are compared on an annual basis to determine how much the actual value differs from the predicted value and what exactly influenced the deviation that took place.
Return on equity is calculated as the result of dividing by 100% the result of dividing net (after paying deductions to the budget) profit by the total value of fixed assets in average annual terms. This ratio reflects the income received from the use of capital assets in the production of goods.
The return on sales makes it clear what proportion of the company's revenue is profit, and is calculated in several ways (depending on the various subtypes of profit), which will be listed below. Based on data on the profitability of sales, the company makes decisions on pricing and the value of related households. cost activities.
Profit Margin Analysis
Having calculated the profitability of sales for several periods, it is possible to determine the dynamics of change attributable to a separate unit of production. The profit margin may vary depending on various factors that will be considered in the factor analysis.
Its increase occurs in the following cases:
- with an increase in revenue, accompanied by a decrease in costs;
- while reducing revenue and expenses, when the latter are reduced faster;
- with higher revenues and slower increases in costs.
The decrease in the indicator occurs under the following circumstances:
- profits and expenses grow at the same time, but expenses increase faster;
- revenue and expenses are declining, but the rate of decrease in revenue is greater;
- expenses go up and revenue goes down.
Other factors also influence the profit margin: inflation, changes in demand for products, and competing firms.
Calculation formulas
Return on sales is determined by three different methods:
- by using the amount of net profit in the calculation;
- through a preliminary calculation of gross profit;
- based on operating income.
By net profit
The formula for determining profitability in this case is as follows:
R = [net profit]/[revenue]*100%
The value, as a rule, is calculated over several periods - only then can an objective assessment of the company's performance and its payback be obtained.
Based on sharp changes in the ratio or, conversely, its stability, you can get a general idea of the company:
- how competently decisions are made;
- whether the attracted resources are used effectively;
- what are the successes and problems of the organization.
By gross profit
In order to determine the gross profit, you need to subtract the cost of production from the revenue.
The formula for calculating the gross profit ratio is as follows:
R = [gross margin]/[revenue]*100%
By operating profit
To calculate the profitability of sales for the company's main line of business, you first need to determine the operating profit by subtracting direct and operating expenses from net profit.
Operating profit margin formula:
R = [operating profit]/[revenue]*100%.
By balance
All the necessary values for calculating the profitability of sales according to the above formulas are taken from the balance sheet and Form 2, which reflects the financial results of the company.
In this case, the formula for calculating the coefficient on the balance will depend on what type of profit is determined by profitability:
Coefficient calculation example
Initial data:
- sales revenue for 2020 amounted to 21 million rubles;
- net profit for 2020 - 6.2 million rubles;
- sales revenue for 2020 - 24.4 million rubles;
- net profit for 2020 - 6.46 million rubles;
To determine the change in sales profitability in 2020, you must first calculate the value of profitability in 2020.
Plugging the values into the formula above gives the following result:
R2015 = 6.2: 21 = 0.295 or 29.5%
R2016 = 6.46: 24.4 = 0.265 or 26.5%
By subtracting one coefficient from the other, you can get the percentage change in profitability:
R = R2016 - R2015 = 26.5 - 29.5 = -3%
Thus, this example shows that in 2020 the decrease in profitability was significant - the indicator decreased by 3%.
Normative value at the enterprise
There is no specific standard for the return on sales ratio. Any value above zero is a good indicator. If Krp<0, то руководству стоит всерьез задуматься об эффективности управления компанией.
If we proceed from the statistical data available for various sectors of the national economy, then we can focus on the following average values for Russia:
With a low or negative coefficient, the management of the organization must change the methods of managing the enterprise, increasing the efficiency of its work by expanding the customer database, increasing the rate of asset turnover and reducing the purchase cost of raw materials, goods or services from contractors.
The dynamics of change and its impact
Thanks to the analysis of profitability of sales, you can get an accurate and objective assessment of the current state of affairs of the company. Considering that this coefficient reflects the most important result of the enterprise's activity - the sale of products, the development trend of the organization can be determined depending on the increase or decrease in the coefficient.
Increase in indicator
The increase in the return on sales ratio in general is a good indicator, but depending on its causes, it can have a different shade.
A favorable trend is when revenue growth outpaces cost growth. This means that the company manages to contain the increase in variable costs, which in this case increase non-linearly.
If the coefficient increases due to the fact that both costs and revenues are simultaneously reduced, and the latter decreases more slowly, then this trend can no longer be unequivocally called favorable, although the coefficient formally increased. This situation requires a deeper analysis in order to be able to determine why the revenue has decreased.
Finally, the most optimal scenario is to increase revenue while reducing costs. In this case, the company should analyze why this is happening, and in the future try to stick to this course of events.
Decrease in indicator
The decrease in the profitability of sales is negative in any case, regardless of the nature of changes in revenue and costs.
To correct the current trend, the company must take appropriate actions (depending on the reasons that led to the decrease in the indicator):
- revise pricing and marketing policies;
- change the assortment of goods;
- reduce costs.
Factor analysis
In order to understand why there was an increase or decrease in the profitability ratio of sales, factor analysis is used, with which you can find out the strengths and weaknesses of the company's activities and predict the company's further development strategy.
The increase in revenue while reducing costs is due to the following reasons:
- sales growth;
- change in the range of goods;
- reduced cost control.
A decrease in revenue at a lower rate of decrease in costs may occur due to rising prices for goods and changes in the assortment.
The following factors influence the simultaneous growth of revenue and expenses at a lower rate of the latter:
- cost reduction;
- price increase;
The reasons for the growth of revenue and expenses that increase faster, as a rule, are the following:
- increase in the cost of goods;
- high price level;
- structural change in the range.
The profitability ratio is the ratio of the net profit (after paying all taxes and interest) of the enterprise to the total amount of sales, i.e., to revenue. It reflects the efficiency of the organization, its financial results and shows how much money from the proceeds from the sale is profit. The value of the indicator must be above zero, which means that the company is profitable. Otherwise, it is unprofitable. For the calculation, data from the income statement are used.
The purpose of any commercial organization is to make a profit. The further development of the enterprise, its financial stability depends on its value. The management of companies, analyzing the performance results, uses different ratios, including profitability indicators, which give an idea of how much profit is received on the amount of invested funds, equity capital, total assets or revenue.
Coefficient definition
The profitability ratio (return on sales - ROS) shows what percentage of profit is contained in the total amount of the company's revenue. This relative indicator is used by management, investors and creditors to analyze the business activity of the company and its performance.
Why is the profit ratio calculated?
The ROS value allows you to evaluate:
- the level of business activity;
- the share of profit in the volume of revenue;
- risks of increasing the cost of production;
- overall performance of the enterprise.
The indicator is calculated for both internal and external use. With its help, the company's management decides on the need to reduce costs, commercial, administrative or other expenses. Investors and lenders evaluate the degree of profitability and the margin of financial strength.
Important! For the management of the company, investors and creditors, it is not the volume of sales that is important, but how much net cash is received from these sales.
Standard value
ROS must be greater than 0. If this is not the case, then the management of the enterprise is inefficient, and it incurs losses. The normative values of this indicator depend on the industry:
- agriculture - 9%;
- retail trade - 2.2%;
- real estate transactions - 5.7%.
- oil and gas production - 4.1%;
- food production - 1.5%;
- construction of buildings - 1.1%.
Reference! There are no strict ROS guidelines. These are only average values for industries for the year, collected by Rosstat based on the results of an analysis of the activities of Russian companies.
For a complete list of averages, please download the Excel file.
In general, an enterprise is considered:
- low-margin if ROS is in the range of 1-5%;
- medium profitable with ROS from 5% to 20%;
- highly profitable in the case of an indicator value of 20-30%;
- super profitable if the value exceeds 30%.
The effectiveness of economic activity can be judged by analyzing the indicator in dynamics. Its increase indicates a high efficiency of sales and a reduction in the cost of production.
Calculation procedure
The indicator is calculated by the formula:
where PE is net profit, i.e., profit remaining after paying interest and taxes;
B - proceeds from the sale of products.
Important! This formula is used exclusively for Russian financial statements. In Western practice, ROS is calculated not by net profit, but by profit before taxes (EBIT).
The values of the indicators are taken for the same period, as a rule, this is a year. Several coefficients are calculated, ideally for 5 years, to assess the dynamics.
Formula according to the forms of financial statements
The income statement data is used to calculate the ROS indicator.
where p. 2400 of the report on f. R. - the value of line 2400 of the income statement;
p. 2110 of the report on f. R. - the value of line 2110 of the income statement.
ROS belongs to the group of profitability ratios:
- return on sales by EBIT - the ratio of profit before tax to sales volume;
- return on assets (ROA) - PE divided by the assets of the enterprise;
- profitability of products - the ratio of EBIT to the cost of goods sold;
- return on equity (ROE) - characterizes the ratio of NP to the amount of equity capital.
Calculation example
For example, let's calculate the profitability ratio of PJSC "LUKOIL" for the last three years according to the Russian and Western systems of financial analysis.
Data source: PJSC LUKOIL official website
As the calculation showed, the value of the coefficient for the past years is significantly higher than all standard values. PJSC LUKOIL is a super-profitable enterprise. In 2015, the profitability ratio exceeded 100%, which indicates that the company has significant income from other activities not related to the sale of products. In this case, the fall in the coefficient in 2016 does not play a significant role, since its value is extremely high, and the growth in the following year indicates that the difficulties that arose were temporary.
You can download a table with profit ratio (ROS) calculations in a convenient format -
The profitability of sales indicator reflects what part of the company's revenue is profit.
The sales profitability formula is calculated for a certain period of time, the unit of measurement is percentage. The general formula for finding return on sales is as follows:
Rp \u003d (P / V) * 100%,
where Rp - profitability of sales,
P is the profit of the enterprise,
B is the company's revenue.
Types of return on sales
When calculating the profitability of sales, different types of profit are used, so there are different versions of the profitability of sales formula. Consider the most common types of return on sales:
- Return on sales in accordance with gross profit, which is calculated as the quotient of dividing gross profit by revenue (as a percentage):
Rp (VP) \u003d (Pval / V) * 100%
- Operating return on sales, which is the quotient of dividing profit before tax by revenue (in percent):
Rp (OP) \u003d (Pop / V) * 100%
- Return on sales in accordance with net profit, which is the quotient of net profit divided by revenue (as a percentage):
Rp (NP) \u003d (Pch / V) * 100%
What does the ROI formula show?
Using the formula for profitability of sales, you can find a coefficient that shows how much of the profit will fall on each ruble earned. The values \u200b\u200bfound using the profitability formula will differ for each enterprise, since their assortment and competitive strategies differ.
Most often found three types of return on sales and they show:
- Gross profit margin shows how many percent of gross profit is in each ruble of goods sold;
- The operating profitability of sales will show what share of the profit will fall on each ruble that is received from the proceeds from which interest and taxes are paid;
- Return on sales based on net profit reflects what share of net profit will fall on each ruble earned.
Determining the profitability of sales helps to optimize the pricing policy of the enterprise, as well as the costs that relate to commercial activities.
The meaning of the formula for profitability of sales
Return on sales is often called the rate of return, as this indicator reflects the share of profit in revenue.
Analyzing the coefficient that characterizes the profitability of sales, it is important to note that if the profitability of sales decreases, this indicates a decrease in the competitiveness of the product and a decrease in demand for it. Then the company's management should think about holding events that stimulate demand, increase the quality of products sold or conquer a new niche in the market.
Revealing trends in changes in the profitability of sales in dynamics, economists single out the reporting and base periods. As the base period, use the indicators of past years (years), when the company received the highest profit.
Formula for calculating profitability of sales by balance sheet
The definition of the base period is necessary to compare the profitability ratio of sales for the reporting period with the ratio that is taken as a basis.
Examples of problem solving
Profitability calculation
The concept of profit from sales
The commercial activity of any company in most cases is aimed at making a profit, designed to cover losses (costs).
Profit includes net income that the company receives in the course of certain economic activities (sale or release of goods, provision of services). The concepts of profit and revenue cannot be considered equivalent, since profit is determined in the process of subtracting from revenue the main items of expenditure for the production of products, among which are:
- The cost of goods (services),
- Payment of taxes (profit tax, excises, VAT, etc.),
- Export fees, etc.
The following components of the work of any company depend on the indicator of realized profit:
- Efficient operation of enterprises,
- Solvency,
- The degree of liquidity.
The enterprise can direct the profit from the sale to self-financing, which leads to an increase in the pace of modernization and automation of the production process.
Sales Profit Formula
There are many ways to calculate the profit of companies, but the basic formula for profit from sales is as follows:
Pr=Vyr-Seb-Nal
Here Pr is the amount of profit from the sale,
Vyr - the amount of proceeds from sales,
cash, taxes
Seb - the cost of goods (services).
According to the second calculation option, the profit from the sale of products is calculated as follows:
Pr \u003d VP-Rupr-Rcom
Here VP is the sum of gross profit,
Rupr - expenses of a managerial nature,
Rkom - expenses of a commercial nature.
Factors affecting profits from sales
The indicator of profit from sales depends on many factors of an internal and external nature.
Internal factors affecting the profit from sales are:
- The number of products sold (manufactured), which depends directly on profitability (with an increase in profitability, sales and profit from sales increase).
- Assortment structure.
- Prices for goods (as prices rise, profits rise).
- Cost (when it increases, profit decreases, by reducing the cost, you can increase profits).
- Commercial costs.
External factors do not have a direct impact on the amount of profit from sales, they affect the final volume of products, including its cost. The following external factors can be listed:
- Deductions for depreciation,
- state influence,
- conditions of nature,
- Market mood (the impact of supply and demand), etc.
Sales Profit Functions
The formula for profit from the sale of goods (services) is used in the process of analyzing the economic activity of enterprises for a deep understanding of the definition of profit.
Applying the most important functions of profit from sales, the manager can:
- Conduct a description of the final result of the company's activities,
- To identify indicators such as efficiency and stability,
- The stimulating function, subject to increasing profit from sales, allows you to increase wages, introduce new technologies, increase the pace of renewal of fixed assets,
- Make deductions of taxes and other payments to the state budget, carrying out the fiscal function of profit;
- To carry out activities in the field of optimizing the production process through the control function of profit.
Examples of problem solving
Profitability of sales is an indicator of economic efficiency of activity. It is expressed as a percentage and allows you to determine the share of profit in the company's revenue.
For the calculation, you will need data on profit and sales for a certain period.
Calculation formula
Rp = (P / Op) x 100%, where:
P - profit;
Op - sales volume.
Above is the general formula. Depending on the ultimate goals of the analysis, you can take the values of operating, gross or net profit for calculation. The indicators should be reduced to numbers of the same order (if sales are in millions, then profit should also be in millions).
Calculation example
Initial data for calculating the profitability of sales of an online store of goods for needlework for the I quarter. 2015:
- gross profit - 275 thousand rubles;
- revenue - 632 thousand rubles.
Gross profit margin - 43.5%.
To understand whether the company worked more efficiently in Q1 or Q2, you need to compare the performance of these periods. For example, revenue in the II quarter amounted to 840 thousand rubles, and gross profit - 322 thousand rubles. Profitability, respectively, 38.3%. Thus, in the II quarter. in each ruble received, the share of profit was 5.2% less than in the first.
Why you need to calculate profitability
It is necessary to calculate for the analysis of the financial and economic activities of the company. The indicator can act as an estimate when comparing two companies. In this case, the costs and pricing policy of enterprises are compared.
The higher the value, the more efficiently the resources are used and the more competent pricing policy of the enterprise is carried out. A low rate indicates problems with profitability.
How to calculate profitability as a percentage?
You can increase it in different ways, usually you need a set of measures aimed at:
- cost reduction;
- increase in the final price of the product;
- revision of the composition of the product;
- withdrawal from circulation of unprofitable units.
It is best to analyze in dynamics, for several months or years. This will allow you to trace the general trend and identify the weaknesses of the enterprise.
Profitability in dynamics on the example of an online store of goods for needlework
Table 1. Profitability of an online store in dynamics
Image 1. Profitability of an online store in dynamics
In the online store from the 1st quarter. 2013 to Q1 2015 there is an increase in profitability by 11.5%. At the same time, fluctuations in the II and III quarters are visible on the graph. 2013 and 2014 The drawdown is related to the seasonality of demand for handicrafts. The peak of sales is observed in the winter pre-New Year period, at which time ready-made sets that are taken as a gift are in demand. In general, the dynamics of the store is positive.
Questions and answers on the topic
No questions have been asked for the material yet, you have the opportunity to be the first to do so
