assess the effectiveness of any commercial company may be by calculating margins.This is a fairly large group of factors that characterize the ratio of profits to costs incurred, revenue or any resources.It does not make much sense to consider all possible options here the calculation, so focus on the most important.
Product profitability reflects how much profit will each unit invested in cost of goods, products or services.Already it is clear from the definition of how to determine the profitability of production.To do this, divide the profit on the cost price.Using different calculations will yield different profit figures, but most of the margin is determined by the net profit.
Obviously, it is impossible to draw the right conclusions, calculating only the profitability of production.Defined as the return on assets, sales and equity.
The return on assets is determined by the ratio of profit to total assets of the enterprise.The meaning of this indicator is very clear: it shows how many units of profit the company brings each unit invested in the formation of assets.
more capacious a factor of profitability of sales.It can be calculated using either the numerator of the sales profit or net income, and the denominator in any case proceeds.In the first version indicator gives an indication of the price policy of the enterprise, as well as the effectiveness of cost management.The second option in addition take into account the impact of the tax is still a factor.In general, the reporting rate characterizes the share of the revenue gains.
If we calculate the ratio between the net profit obtained and the value of company's own capital, we obtain the value of the coefficient profitability, obviously equity.The meaning of this indicator is very important because the definition of efficiency 'equity gives an indication of the organization's ability to generate income, as well as gives an opportunity to compare with alternative investment funds.
simple calculation of profitability is likely to be insufficient for the formulation of conclusions.It is necessary to assess the changes in these indicators over several years, to judge the positive and negative dynamics.Also, you should compare the different margins between them.
important definition of dynamics of indicators can only identify the causes of any changes.Judging that it is and to what extent has affected profitability ratios can be achieved by the application of factor analysis.The most common factor analysis carried out in respect of return on equity and assets using the methodology of the company DuPont.
By simple transformations we can get that on the return on assets is influenced by their turnover and profitability of sales, as in the case of equity to these factors is added and the leverage ratio.Using the method of absolute differences, a determination of influence separately each of these factors, as well as their influence in the aggregate.
As you can see, for all its simplicity indicators such as product profitability and other profitability ratios play an extremely important role in describing the financial condition of the company.Each of them is connected with the most important performance indicator - profit, hence their calculation should be given special attention.
