Return on equity, other profitability indicators and their analysis

purpose of any company is profit, no doubt about it.But profit - a measure not only to a large extent conditional, but absolute.In other words, based only on the amount of profits is impossible to compare different companies together.A more correct comparison is made in terms of relative performance.In the field study of profit and profitability are the most popular relative performance are in class margins.They represented a very wide range of values, but we will focus on how to identify the rate of return on equity and assets and operating activities.

In order to produce the products or services of the company carries the costs, thereby forming costs.By the relationship of the profit to the cost of the value we determine the profitability of operating activities.This ratio shows how much each ruble invested in costs allows you to profit.

obligatory condition for the existence of the company is the presence of the owner, so it is advisable to calculate the efficiency of the enterprise it from his

point of view.Usually it is calculated rate of return on equity.The calculation is very clear and it is dividing net income by the sum of equity capital, which can be easily found in the passive balance of the company.With the help of this indicator can be judged on the amount of income attributable to each unit of capital ownership.Very often, the coefficient of return on equity is subjected to a separate analysis on what will be discussed below.

Any labor process is characterized by the presence of objects and means of labor.They represent a property that generates an asset balance sheet.In this context, it makes sense to calculate the return on assets.Obviously, it is enough to divide up profits on the balance sheet.Most often, the calculations are based on net income, but sometimes used and the profits that have not yet cleared of taxes.

In the study of this group of indicators often hold a special analysis of return on equity and assets, which is called the quotient.Return on assets most directly dependent on their turnover and profitability of sales, the quality of the use of equity is also depending on the leverage ratio.You may be wondering why these factors?In fact, everything is easy.Consider the return on assets, represented as a ratio of net income and total assets.Multiplying the numerator and denominator by her company received proceeds, and then do a little transformation, we obtain the product of the asset turnover on profitability of sales.Return on equity would have to be multiplied by another asset and share them away.

After determining the factors necessary to calculate the values ​​for a number of years, and then determine how changes each of them in absolute value from period to period.In the last step by the method of absolute differences is determined by the isolated effect of each factor, and when we get the addition of the resulting change in the index for the entire period.

study of all profitability indicators make sense not only from the perspective of identifying factors influence them, but also in terms of changes in the dynamics.Obviously, the presence of positive dynamics is a positive development.However, even the existence of positive dynamics is not always uniquely well characterizes the company.The fact that other similar businesses can be much more effective, so as to be compared with the average profitability of the company values.