Profitability - a measure of the effectiveness of any business

click fraud protection

Profitability - an indicator, which is expressed in relative terms, and shows the profitability of the business as a percentage.Sometimes the margin for non-commercial enterprises imply effectiveness.Determined profitability ratio of costs and benefits.The resulting ratio shows, as a result of entrepreneurial activity of the company covers the costs.

It should be understood that the profits and profitability - are two different concepts.The resulting profits for one company may be considered huge, but for another - slightly.There profitability criteria that determine the profit including the value of the enterprise.Thus, the margin is calculated.This ratio of income to capital, which is invested in the company.One of the indicators of profitability can be regarded as the ratio of profit (net, both in the balance sheet) before income taxes (percent) to the total amount of long-term finance.The second indicator is calculated as the ratio of the same after-tax profits (interest) to an available equity.These factors successfully used when comparing two homogeneous companies and their performance with the average figures for the industry.To correct comparison must take profitability is not necessarily less than the last three years.And you need to compare several indicators simultaneously.

Economic profitability - is the coefficient, which is calculated as the ratio of the balance sheet profit and the cost of capital.All necessary parameters are taken from the balance sheet.This ratio shows the amount of profit earned by the firm per unit cost of capital represented by the total amount of all resources, regardless of their funding sources.

Profitability divided into pure and total.The calculation of its coefficients is used as a separate product, and the results of business activities of the enterprise as a whole.

Thus, the total return on assets is represented by a value reflecting the amount of finance that are involved now for each ruble of profit.It is calculated the ratio of profit to the average value of assets over a certain period (quarter, year).

Profitability of production is a general indicator which characterizes the economic efficiency of the entire economic activity of the company and its divisions.Calculate the ratio of profit (net income) to the cost of production of finished products.Profitability can only be in excess of revenues over expenditures.

increase in the cost-effectiveness can only contribute to reducing the cost of finished products while improving its quality.

Product profitability - the ratio of profits to the respective production costs (the cost of the finished product).This ratio indicates the effectiveness of both the production as a whole, and the realization of manufactured goods or services in particular.

profitability - the definition of efficiency as the entire product and individual species.The modern definition of the economic condition of the company is carried out with the use of these new indicators, as the main factor of profitability and return on equity ratio, which is defined in the balance sheet as own.The latter figure is calculated by the ratio of net income to average equity.The coefficient indicates the degree of return on equity and characterizes a prerequisite of development and retention of the company's market.

Thus, margins - a measure of efficiency of the use of current and non-recurring costs.