What is the profit margin of the enterprise

Marginal income - the difference between the proceeds of an economic entity, which he receives from them realize the products (services, works), and the total amount of its variable costs.

This indicator is a quantitative, measured in monetary units.The value of the index reflects the contribution of the company, which it can do in the coverage of fixed costs in order to make a profit (ie such income directly affects the amount of income actually received).

Marginal income can be determined in two ways.First, from the proceeds of the products sold are deducted all direct costs and associated overhead (or variable) costs.Second, fixed costs are added to the profits of the enterprise.There

term average value of marginal costs.It is understood as the difference between average variable costs and the price of the product itself.This figure reflects the contribution of each item to cover the cost of the enterprise and profit.

essence of marginal income, in general, is to ensure that the sum of the variable costs exceeded income shows how the company is able to cover its fixed costs and profit.

specific proportion of marginal income in the revenue determined by a preliminary calculation of the ratio of marginal income.This ratio is the ratio of marginal income to the revenue of the firm.

If the index is zero, then proceeds from the sale may cover only variable costs, that is, the company makes a loss, equal to the amount of fixed costs.

If the index is above zero, but does not exceed the fixed costs, it is possible to say that the sales proceeds can cover all of the variable and fixed costs.The loss will be less than with fixed costs.

In a situation where marginal revenue equals the fixed costs, sales revenue and is able to cover the variable and fixed costs.In such a situation the company does not bear the loss.

Exceeding fixed costs profit margins, the company can not only cover its costs, but also to make a profit.

margin revenue, so, along with the income measure, is the most important source of data for calculating the thresholds that are used during the operational analysis of the enterprise and determination of financial results of its activities.

Determination of financial result of activity makes it possible to determine the amount of income that characterizes the result of the sale of products.These data allow us to decide on the supply of further volumes of production and sales of products.

method of calculating the financial result by the index of marginal income instrument called the Foresight.The value of the revenue from the sale of associated only with variable costs for a particular type of product.Score is calculated for each type of product.The difference between these indicators expresses the proportion of one product to cover the costs.From the sum of all shares of the coating costs are subtracted the value of all fixed costs.As a result, it becomes known to the degree of participation of each product in the reimbursement of these costs (ie to achieve profits).

Marginal income has an impact on the adoption of a number of strategic decisions on the management of industrial policy.These decisions include: the feasibility of further promotion of certain goods in the markets, the need for additional orders for production, the prospects of cooperation with each group of customers.By and large, profit margins determines the whole, effectiveness and efficiency of the enterprise.