That profit margin shows the financial manager?

Just not enough to make production for profit.Obviously, it should be sold.The sale process (implementation) could be almost more difficult than production, but its importance can hardly be overestimated.Obviously, the efficiency of the implementation requires attention.Like many other aspects of enterprise marketing activity can be evaluated using an indicator of profitability.In this case, it makes sense to measure called return on sales.

Shows the ratio is what takes a share of the revenue gains.If you have information index calculation can be made both on the enterprise as a whole and for individual products.The total return on sales is the basis of the above, the ratio of profit to the amount of revenue received.Presented revenue is determined is always the same, with him no problem almost never.But with the profit ratio it is much more complicated, as it can be determined by a huge number of ways, taking into account some factors and disregarding others.Let us examine this point in more detail.

Many profitability calculated on the basis of net profit.In this case it is possible to do the same, and to use this value.The calculated profit margin shows the share of the profits with the influence of the greatest number of factors.These include pricing, cost management policy, especially tax, fee for loan capital, and others.The problem with this calculation is that the net profit is dependent on factors that are not related to production and sales, that is, from other income and expenses.In addition, excluding taxes and fees for borrowed capital is not possible to compare the calculated rate to the levels of other companies in the event that they are taxed or otherwise have a different capital structure.

Consider the above can be achieved by the use of pre-tax profit, or earnings from sales.The calculation based on the profit before tax profit margin shows the efficiency of production and sales under the influence of factors other than taxation and allows you to compare the organization with different tax status.However, in this case the profit is still influenced by other activities of the company, which is somewhat distorts the information is about the basic production.If significant figures for other activities it is advisable to calculate profit from sales.Excluding tax and other activities, the profitability of sales shows the effectiveness of a given pricing policy and costs.With coefficient calculated in this way is easiest to compare between different companies, as taken into account only the most significant factors.

As you may already realize one of the most frequently used methods of analysis is a comparison of one company, with the same coefficients determined for other companies.Apart from such comparisons may be used and the comparison with the average values.However, the most commonly used horizontal analysis, which consists in a comparison between the performance of the enterprise for several periods.Determines the change in performance and identify trends that allow us to judge the effectiveness of various management decisions.

worth noting that almost all the profit margins are closely connected and influence each other.Thus, the profitability of sales is particularly strong influence on the efficiency (cost-effectiveness) of equity and assets.Assess the level of influence can be using a special type of study, called factor analysis.