Calculation of profitability of the company is a very important step in the evaluation of financial performance.These figures allow us to judge the effectiveness of activities.However, in order to draw any conclusions, a simple calculation of these indicators is not enough.After calculating the figures should be analyzed with the use of a particular method.One of the most popular methods is the factorial analysis of profitability of the enterprise, so on it we will stop.
As can be seen from the name, this type of analysis is to determine the impact on the index result in this case - the profitability of various factors.A great contribution to the development of this method has made a firm DuPont, which experts have developed a special formula that makes it easy to analyze the return on assets and equity.These formulas are based on the method of absolute differences, which applies to several transformed mathematical models.Consider the transformations to be carried out to produce a factor analysis of the profitability of these formulas.
begin with return on assets, which is determined by the ratio of net profit to the average for the period under review, the cost of most of these assets.Multiplying the numerator and denominator of this formula to measure revenue.Now you can see that the resulting fraction can be represented as the product of two fractions, each of which is economically significant indicator: asset turnover and return on sales.Thus, we can conclude that it is this combination of factors affects the return on assets.
in respect of return on equity ownership transformation should do a little more.The calculation formula of this index must be multiplied and divided by revenue and assets.After a series of simple manipulations can be concluded that the degree of efficiency of capital ownership is based on the same factors that affect the return on assets (rate of turnover and profitability of sales), as well as indicators of financial dependence.
Factor analysis of profitability of production is made in a slightly different way.The model can be transformed, revealing and detailed earnings in the numerator and the denominator of the cost price.After this procedure, to the resulting mathematical model can be applied method of chain substitutions.Use the method of absolute differences in this case is impossible, as the resulting mathematical model will have a multiple character.
obvious that having the opportunity to make a factor analysis of profitability depends on the availability of information about the factors for several periods, at least two.The preferred source data, intermediate and final results presented in tables.Of course, as far as possible it is to use automation, ie computers and special software.The analysis should conclude which factors have the greatest positive and negative effects, and what factors can be ignored.Subsequent management decisions should help to enhance the positive and mitigate the negative influence.
This type of analysis is not the only one suffered by profitability.Much more often for their analysis using comparison method.Comparisons can be made with the same performance of the enterprise for the previous periods (horizontal analysis, in time), as well as with those of other companies (analysis in the space), and with the industry average.
