In order to determine the effectiveness of the enterprise is necessary to resort to the calculation of certain indicators.As a rule they determine the relative level of profitability and are called indicators of profitability.There is no such indicators, which would be characterized by the overall profitability of the enterprise.This is due to the fact that the activity of the company is multifaceted and each of these indicators separately characterizes efficiency of use of a resource.
Enough generalized production of the company can be defined as the impact by means of work on objects of labor.Objects representing how things work, and its funds are the property of the company, and together constitute the productive assets.The total return on assets is calculated the ratio of profits to their cost.Production assets are used for production, ie the core activities.It stipulates that the profit figure used in the calculation must not include other income and expenses.This indicator is the profit from the sales, and that it is usually used in determining the profitability of this type.As for the value of the assets, profitability is calculated, here too, there are some features.It consists in the fact that the profit is the amount that accumulates during the period and is well represented in the financial statements.And the cost is recognized in the balance sheet at a given date, so difficult to account possible changes.It is best used in the calculation of the average cost, and with a lack of information can allow calculation based on the value at the end of the period.
Production assets are only part of the assets, but is typically set and the overall profitability of the entire property.Method of calculation is quite similar and consists in dividing the earnings on assets.This cost must also be calculated as the average, if possible.As for profits, the profits from the sales are usually not used.Most often, the calculations are based on net income.Also, sometimes there are indicators of return on assets, calculated on profit before tax.Thus, the profitability may be somewhat overstated, but this effect is eliminated in the process of further analysis.
Analysis of profitability indicators often is to use the method of comparison.The simplest and most obvious method, which allows you to judge the effectiveness of the dynamics of the company, is a horizontal analysis.It consists in determining the absolute and relative changes in profitability over several periods with the establishment of patterns and trends.If it is possible to use a larger amount of information, it is possible to use the comparison not only in time but also in space - with those of other similar plants.In addition, you can compare the profitability achieved in the enterprise, with the indices for the industry as a whole.
deserves mention and the fact that the total return on assets and production assets may be subjected to factor analysis.This type of analysis is to determine the transformation parameters of a mathematical model, which implies its extension or lengthening.Such transformations allow to identify the factors that affect the profitability, then determined their specific quantitative impact.This analysis can be performed as described by DuPont or by any other suitable method.
