Operating profit margin formula on balance sheet. How to calculate return on sales: what it is and how it is derived. Factors reducing profitability

It is important to differentiate the profitability indicator from revenue. If revenue simply reflects the company’s total turnover (it is calculated in rubles), then profitability is the efficiency of its activities (expressed in %). Any business that has brought profit at the end of the period under review can be called profitable. If a loss is made, the profitability will be negative.

In trading activities, the profitability of a product is calculated as the ratio of net profit to cost.

Profitability of goods (services) = net profit from sales (provision of services) / cost * 100%.
Return on sales (services) = net profit/revenue*100%.

The assessment takes into account the company's net profit and turnover. If we take c as a basis, then it will be equal to = 11/28*100%= 39.2%. Using this formula, it is advisable to evaluate each product group separately. For example, the profitability of sales of T-shirts, bags, etc. This will allow you to highlight the most effective items in the assortment, as well as those that need to be worked on to increase their profitability.

Acceptable level of profitability by industry

There is no single acceptable level of profitability; it varies depending on the industry. So, for example, in the mining industry, the return on sales is considered normal above 50%, but in the woodworking industry it does not reach 1%.
According to researchers, the average Russian profitability rate is about 12%. However, this value in itself is practically meaningless unless it is compared with similar performance indicators of competitors or industry averages.

Please note that if the profitability of your business deviates significantly from the industry average (by 10%), this increases the likelihood of a tax audit.

If you have come to the conclusion that you are seriously behind your competitors in terms of business efficiency, you need to work on improving your profitability. This goal can be achieved through a competent marketing policy aimed at increasing the customer base and ensuring an increase in the turnover of goods, as well as by obtaining more profitable offers from suppliers of goods (or subcontractors).

Let's consider the return on sales ratio(ROS). This indicator reflects the efficiency of the enterprise and shows the share (as a percentage) of net profit in the total revenue of the enterprise. In Western sources, the return on sales ratio is called ROS ( return on sales). Below I will consider the formula for calculating this coefficient, give an example of its calculation for a domestic enterprise, describe the standard and its economic meaning.

Sales profitability. Economic meaning of the indicator

It is advisable to begin studying any coefficient with its economic meaning. Why is this coefficient needed? It reflects the business activity of an enterprise and determines how efficiently the enterprise operates. The return on sales ratio shows how much cash from products sold is the profit of the enterprise. What is important is not how many products the company sold, but how much net profit it earned from these sales.

The return on sales ratio describes the efficiency of sales of the company's main products, and also allows you to determine the share of cost in sales.

Return on sales ratio. How is profitability calculated? Calculation formula for balance sheet and IFRS

The formula for return on sales according to the Russian accounting system is as follows:

Return on sales ratio = Net profit/Revenue = line 2400/line 2110

It should be clarified that when calculating the ratio, instead of net profit in the numerator, the following can be used: gross profit, earnings before taxes and interest (EBIT), earnings before taxes (EBI). Accordingly, the following coefficients will appear:

Gross profit margin ratio = Gross profit/Revenue
Operating profitability ratio =EBIT/Revenue
Return on sales ratio for profit before taxes =EBI/Revenue

To avoid confusion, I recommend using a formula where the numerator is net profit (NI, Net Income), because EBIT is calculated incorrectly based on domestic reporting. The following formula for Russian reporting is obtained:

In foreign sources, the return on sales ratio - ROS is calculated using the following formula:

Video lesson: “Sales profitability: calculation formula, example and analysis”

Sales profitability. Example of balance sheet calculation for Aeroflot OJSC

Let's calculate the return on sales for the Russian company OJSC Aeroflot. To do this, I will use the InvestFunds service, which allows you to obtain financial statements of the enterprise by quarter. Below is the import of data from the service.

Profit and loss statement of JSC Aeroflot. Calculation of the return on sales ratio

So, let's calculate the return on sales for four periods.

Sales return ratio 2013-4 =11096946/206277137= 0.05 (5%)
Return on sales ratio 2014-1 = 3029468/46103337 = 0.06 (6%)
Return on sales ratio 2014-2 = 3390710/105675771 = 0.03 (3%)

As you can see, the return on sales increased slightly to 6% in the first quarter of 2014, and in the second it halved to 3%. However, the profitability is greater than zero.

Let's calculate this coefficient according to IFRS. To do this, let’s take financial reporting data from the company’s official website.

Report according to IFRS of JSC Aeroflot. Calculation of the return on sales ratio

For nine months of 2014, the return on sales ratio of Aeroflot OJSC was equal to: ROS = 3563/236698 = 0.01 (1%).

Let's calculate ROS for 9 months of 2013.
ROS=17237/222353 =0.07 (7%)

As you can see, over the year the ratio worsened by 6% from 7% in 2013 to 1% in 2014.

Return on sales ratio. Standard

The value of the normative value for this coefficient Krp>0. If the profitability of sales turns out to be less than zero, then you should seriously think about the efficiency of enterprise management.

What level of return on sales ratio is acceptable for Russia?

– mining – 26%
– agriculture – 11%
– construction – 7%
– wholesale and retail trade – 8%

If you have a low coefficient value, then you should increase the efficiency of enterprise management by increasing the customer base, increasing the turnover of goods, and reducing the cost of goods/services from subcontractors.

Hello! Today we’ll talk about profitability, what it is and how to calculate it. aimed at making a profit. The correct operation and effectiveness of the management methods used can be assessed using certain parameters. One of the most optimal and informative is the profitability of the enterprise. For any entrepreneur, understanding this economic indicator is an opportunity to assess the correctness of resource consumption in the enterprise and adjust further actions in all directions.

Why calculate profitability

In many cases, the financial profitability of an enterprise becomes a key indicator for analyzing the activities of a business project, which helps to understand how well the funds invested in it pay off. Correctly calculated indicators for several factors and items are used by the entrepreneur for pricing services or goods, for general analysis at the working stage. They are calculated as a percentage or used in the form of a numerical coefficient: the larger the number, the higher the profitability of the enterprise.

In addition, it is necessary to calculate enterprise profitability ratios in the following production situations:

• To forecast the possible profit that the company can receive in the next period;
• For comparative analysis with competitors in the market;
• To justify large investment investments, helping a potential transaction participant determine the projected return on a future project;
• When determining the real market value of a company during pre-sale preparation.

Calculation of indicators is often used when lending, obtaining loans or participating in joint projects, developing new types of products.

Enterprise profitability

Discarding scientific terminology, we can define the concept:

Enterprise profitability as one of the main economic indicators that well characterizes the profitability of an entrepreneur’s labor. Its calculation will help you understand how profitable the chosen project or direction is.

Many resources are used in the production or sales process:

• Labor (hired workers, personnel);
• Economic;
• Financial;
• Natural.

Their rational and correct operation should bring profit and constant income. For many enterprises, analysis of profitability indicators can become an assessment of operating efficiency for a certain (control) period of time.

In simple words, business profitability is the ratio between the costs of the production process and the resulting profit. If after a period (quarter or year) a business project has produced a profit, then it is called profitable and beneficial for the owner.

To carry out correct calculations and predict indicators in future activities, it is necessary to know and understand the factors that influence profitability to varying degrees. Experts divide them into exogenous and endogenous.

Among exogenous ones there are:

• Tax policy in the state;
• General sales market conditions;
• Geographical location of the enterprise;
• Level of competition in the market;
• Features of the political situation in the country.

In many situations, the profitability and profitability of an enterprise is influenced by its geographic location, proximity to sources of raw materials or consumer clients. The situation on the stock market and exchange rate fluctuations have a huge impact.

Endogenous or internal production factors that greatly influence profitability:

• Good working conditions for personnel of any level (which necessarily has a positive effect on product quality);
• Efficiency of the company's logistics and marketing policy;
• General financial and management policies of management.

Taking into account such subtleties helps an experienced economist make the level of profitability as accurate and realistic as possible.

Factor analysis of enterprise profitability

To determine the degree of influence of any factors on the level of profitability of the entire project, economists conduct special factor analysis. It helps to determine the exact amount of income received under the influence of internal factors, and is expressed by simple formulas:

Profitability = (Profit from sales of products / Cost of production) * 100%

Profitability = ((Product price - Product cost) / Product cost)) * 100%

Typically, when conducting such financial analysis, a three-factor or five-factor model is used. Quantity refers to the number of factors used in the counting process:

• For the three-factor factor, the profitability of manufactured products, the indicator of capital intensity and turnover of fixed assets are taken;
• For the five-factor it is necessary to take into account labor and material intensity, depreciation, and turnover of all types of capital.

Factor calculation is based on the division of all formulas and indicators into quantitative and qualitative, which help to study the development of the company from different angles. It shows a certain relationship: the higher the profit and capital productivity from the production assets of an enterprise, the higher its profitability. It shows the manager the relationship between standards and business results.

Types of profitability

In various production areas or types of business, specific indicators of enterprise profitability are used. Economists identify three significant groups that are used almost everywhere:

1. Profitability of products or services: the basis is the ratio of the net profit received from the project (or direction in production) and the costs spent on it. It can be calculated both for the whole enterprise and for one specific product;
2. Profitability of the entire enterprise: this group includes many indicators that help characterize the entire enterprise as a whole. It is used to analyze a working project by potential investors or owners;
3. Return on assets: a fairly large group of various indicators that show the entrepreneur the feasibility and completeness of using a certain resource. They allow you to determine the rationality of using loans, your own financial investments or other important assets.

Analysis of the profitability of an enterprise should be carried out not only for internal needs: this is an important stage before large investment projects. It may be requested when providing a loan, or it may become the starting point for enlarging or reducing production.

A real complete picture of the state of affairs at the enterprise can be obtained by calculating and analyzing several indicators. This will allow you to see the situation from different angles and understand the reason for the decrease (or increase) in expenses for any items. To do this, you may need several coefficients, each of which will reflect a specific resource:

1. ROA – return on assets;
2. ROM – level of product profitability;
3. ROS – return on sales;
4. ROFA – return on fixed assets;
5. ROL – personnel profitability;
6. ROIC – return on investment in an enterprise;
7. ROE – return on equity.

These are just a small number of the most common odds. To calculate them, it is enough to have figures from open sources - the balance sheet and its annexes, current sales reports. If an estimated assessment of the profitability of a business for launch is needed, the data is taken from a marketing analysis of the market for similar products or services, from competitors’ reports available in a general overview.

Calculation of enterprise profitability

The largest and most general indicator is the level of profitability of the enterprise. To calculate it, only accounting and statistical documentation for a certain period is used. In a more simplified version, the formula for enterprise profitability looks like this:

P= BP/SA*100%

• P is the main profitability of the enterprise;
• BP is an indicator of balance sheet profit. It is equal to the difference between revenue received and cost (including organizational and management costs), but before taxes are subtracted;
• CA is the total cost of all current and non-current assets, production facilities and resources. It is taken from the balance sheet and its annexes.

For the calculation, you will need the average annual cost of all tangible assets, the depreciation of which is used in the formation of the selling price for services or goods.

If the assessment of the enterprise's profitability is low, then certain management measures should be taken to improve the situation. It may be necessary to adjust production costs, reconsider management methods or rationalize the use of resources.

How to calculate return on assets

A complete analysis of an enterprise's profitability indicators is impossible without calculating the efficiency of using various assets. This is the next important stage, which helps to assess how fully all assets are used and understand their impact on profit. When assessing this indicator, pay attention to its level. A low value indicates that capital and other assets are not performing sufficiently, while a high value confirms the correct management tactics.

In practice, the return on assets (ROA) indicator for an economist means the amount of money that falls on one unit of assets. In simple words, it shows the financial return of a business project. Calculation for all types of assets must be carried out regularly. This will help to timely identify an object that does not bring return or benefit in order to sell it, lease it or modernize it.

In economic sources, the formula for calculating return on assets looks like:

• P – profit for the entire analyzed period;
• A is the average value by type of asset for the same time.

This coefficient is one of the three most revealing and informative for a manager. A value less than zero indicates that the enterprise is operating at a loss.

Return on fixed assets

When calculating assets, the profitability ratio of fixed assets is separately identified. These include various means of labor that are directly or indirectly involved in the production process without changing the original form. The period of their use must exceed a year, and the amount of depreciation is included in the cost of services or products. Such basic means include:

• Any buildings and structures in which workshops, offices, laboratories or warehouses are located;
• Equipment;
• Heavy duty vehicles and loaders;
• Office and work furniture;
• Passenger cars and passenger transport;
• Expensive tool.

Calculating the profitability of fixed assets will show managers how effective the economic activity of a business project is and is determined by the formula:

R = (PR/OS) * 100%

• PE – net profit for a certain period;
• OS – cost of fixed assets.

This economic indicator is very important for commercial manufacturing enterprises. It gives an idea of ​​the share of profit that falls on one ruble of invested fixed assets.

The coefficient directly depends on profitability and should not be less than zero: this means that the company is operating at losses and is using its fixed assets irrationally.

Profitability of products sold

This indicator is no less important for determining the level of profitability and success of the company. In international economic practice, it is designated as ROM and is calculated using the formula:

ROM=Net profit/cost

The resulting coefficient helps determine the efficiency of sales of manufactured products. In fact, this is the ratio of sales income and costs of its production, packaging and sale. For an economist, the indicator clearly demonstrates how much each ruble spent will bring in percentage terms.

The algorithm for calculating the profitability of products sold may be more understandable for beginners:

1. The period in which it is necessary to analyze the indicator is determined (from a month to a whole year);
2. The total amount of profit from sales is calculated by adding up all income from the sale of services, products or goods;
3. Net profit is determined (according to the balance sheet);
4. The indicator is calculated using the above formula.

A good analysis will include a comparison of profitability of products sold over several periods. This will help determine the decline or increase in the company’s income over time. In any case, you can conduct a more in-depth review of each supplier, group of products or assortment, and work through the customer base.

Return on sales

Margin or return on sales is another important consideration when pricing a product or service. It shows what percentage of total revenue comes from the profit of the enterprise.

There is a formula that helps calculate this type of indicator:

ROS= (Profit / Revenue) x 100%

As a basis for calculation, different types of profit can be used. Values ​​are specific and vary depending on the product range, company activity and other factors.

Sometimes experts call return on sales the rate of profitability. This is due to the ability to show the share of profit in total sales revenue. It is also calculated over time to track changes over several periods.

In the short term, a more interesting picture can be given by operating profitability of sales, which can be easily calculated using the formula:

Operating return on sales = (Profit before tax / Revenue) x 100%

All indicators for calculations in this formula are taken from the “Profit and Loss Statement”, which is attached to the balance sheet. The new indicator helps the entrepreneur understand what real share of revenue is contained in each monetary unit of his revenue after paying all taxes and fees.

Such indicators can be calculated for a small enterprise, one department or an entire industry, depending on the task at hand. The higher the value of this economic coefficient, the better the enterprise performs and the more profit its owner receives.

This is one of the most informative indicators that helps determine how profitable a business project is. Without calculating it, it is impossible to draw up a business plan, track costs over time, or assess the profitability of the enterprise as a whole. It can be calculated using the formula:

R=VP/V, Where:

• VP – gross profit (calculated as the difference between the revenue received from the sale of goods or services and the cost);
• B – proceeds from sale.

The formula often uses a net profit indicator, which better reflects the state of affairs at the enterprise. The amount can be taken from the balance sheet appendix.

Net profit no longer includes income tax, various selling and overhead expenses. It includes current operating costs, various penalties and paid loans. To determine it, the total revenue that was received from the sale of services or goods (including discounts) is calculated. All expenses of the enterprise are deducted from it.

It is necessary to carefully select the time period depending on the task of financial analysis. To determine the results of internal control, the calculation of profitability is carried out over time regularly (monthly or quarterly). If the goal is to obtain an investment or loan, a longer period is taken for comparison.

Obtaining the profitability ratio provides a lot of information for the management personnel of the enterprise:

• Shows the correspondence between actual and planned results, helps evaluate business performance;
• Allows you to conduct a comparative analysis with the results of other competing companies in the market.

If the indicator is low, the entrepreneur needs to think about improving it. This can be achieved by increasing the amount of revenue received. An alternative is to increase sales, raise prices slightly, or optimize costs. You should start with small innovations, observing the dynamics of changes in the coefficient.

Personnel profitability

One interesting relative indicator is personnel profitability. Almost all enterprises, regardless of their form of ownership, have long taken into account the importance of effective labor management. They influence all areas of production. To do this, it is necessary to monitor the number of personnel, their level of training and skill, and improve the qualifications of individual employees.

The profitability of personnel can be determined using the formula:

• PE – net profit of the enterprise for a certain period of time;
• CH – number of employees at different levels.

In addition to this formula, experienced economists use more informative ones:

1. Calculate the ratio of all personnel costs to net profit;
2. The personal profitability of one employee, which is determined by dividing the costs associated with him by the share of profit brought to the enterprise budget.

Such a complete and detailed calculation will help determine labor productivity. Based on it, you can carry out a kind of diagnostics of jobs that may be reduced or need to be expanded.

Do not forget that the profitability of personnel may be affected by low-quality or old equipment, its downtime or other factors. This can reduce performance and incur additional costs.

One of the unpleasant, but sometimes necessary methods is often reducing the number of employees. Economists must calculate the profitability for each type of personnel in order to highlight the weakest and most vulnerable areas.

For small enterprises, regular calculation of this coefficient is necessary in order to adjust and optimize their expenses. With a small team, it is easier to carry out calculations, so the result can be more complete and accurate.

Profitability threshold

For many trading and manufacturing enterprises, calculating the profitability threshold is of great importance. It means the minimum volume of sales (or sales of finished products), at which the revenue received will cover all costs of production and delivery to the consumer, but without taking into account profit. In fact, the profitability threshold helps the entrepreneur determine the number of sales at which the enterprise will operate without losses (but will not make a profit).

In many economic sources, this important indicator can be found under the name “break-even point” or “critical point”. It means that the enterprise will receive income only if it overcomes this threshold and increases the coefficient. It is necessary to sell goods in quantities that exceed the volume obtained according to the formula:

• PR – threshold (norm) of profitability;
• FZ – fixed costs for sales and production;
• Kvm – gross margin coefficient.

The last indicator is pre-calculated using the formula:

Kvm=(V – Zpr)*100%

• B – enterprise revenue;
• Zpr – the sum of all variable costs.

The main factors influencing the profitability threshold ratio:

• Product price per unit;
• Variable and fixed costs at all stages of production and sale of this product (service).

With the slightest fluctuation in the values ​​of these economic factors, the value of the indicator also changes up or down. Of particular importance is the analysis of all expenses, which economists divide into fixed and variable. The first include:

• Depreciation for fixed assets and equipment;
• Rent;
• All utility costs and payments;
• Salaries of enterprise management employees;
• Administrative costs for their maintenance.

They are easier to analyze and control, and can be monitored over time. Variable costs become more “unpredictable”:

• Wages of the entire workforce of the enterprise;
• Fees for servicing accounts, loans or transfers;
• Costs for the purchase of raw materials and components (especially when exchange rates fluctuate);
• Payment for energy resources spent on production;
• Fare.

If a company wants to remain consistently profitable, its management must control the rate of profitability and analyze expenses for all items.

Any enterprise strives to develop and increase capacity, open new areas of activity. Investment projects also require detailed analysis, which helps determine their effectiveness and adjust investments. In domestic practice, several basic calculation methods are more often used, giving an idea of ​​what the profitability of a project is:

1. Methodology for calculating net present value: it helps determine the net profit from a new project;
2. Methodology for calculating the profitability index: necessary to generate income per unit of cost;
3. Method for calculating marginal efficiency of capital (internal rate of return). It is used to determine the maximum possible level of capital expenditure for a new project. The internal rate of return is most often calculated using the formula:

INR = (current net worth / current initial investment amount) * 100%

Most often, such calculations are used by economists for certain purposes:

• If necessary, determine the level of expenses in the case of developing a project using raised funds, loans or credits;
• To prove cost-effectiveness and document the benefits of the project.

If there are bank loans, calculating the internal rate of return will give the maximum allowable interest rate. Exceeding it in real work will mean that the new enterprise or direction will be unprofitable.

1. Methodology for calculating the return on investment;
2. A more accurate modified method for calculating the internal rate of return, for the calculation of which the weighted average cost of the advanced capital or investment is taken;
3. An accounting rate of return technique that is used for short-term projects. In this case, profitability will be calculated using the formula:

RP=(PE + depreciation/amount of investment in the project) * 100%

PE – net profit from a new business project.

A full calculation in various ways is done not only before developing a business plan, but also during the operation of the facility. This is a necessary set of formulas that owners and potential investors use when trying to assess the possible benefits.

Ways to increase enterprise profitability

Sometimes the analysis produces results that require serious management decisions. To determine how to increase profitability, it is necessary to understand the reasons for its fluctuations. To do this, the indicator for the reporting and previous periods is studied. Typically, the base year is the past year or quarter in which there was high and stable revenue. What follows is a comparison of the two coefficients over time.

The profitability indicator may be affected by changes in selling prices or production costs, increases in costs or the cost of raw materials from suppliers. Therefore, it is necessary to pay attention to factors such as seasonal fluctuations in the demand of product buyers, activity, breakdowns or downtime. When solving the problem of how to increase profitability and profitability, it is necessary to use various ways to increase profits:

1. Improve the quality of products or services and their packaging. This can be achieved by modernizing and re-equipping its production facilities. This may require serious investment at first, but in the future it will more than pay off in resource savings, a reduction in the amount of raw materials, or a more affordable price for the consumer. You can consider the option;
2. Improve the properties of your products, which will help attract new consumers and become a more competitive company in the market;
3. Develop a new active marketing policy for your business project and attract good management personnel. Large enterprises often have an entire marketing department that deals with market analysis, new promotions, and finding a profitable niche;
4. Various ways to reduce costs in order to compete with a similar range. This should not come at the expense of the quality of the product!

The manager needs to find a certain balance among all the methods in order to achieve a lasting positive result and maintain the enterprise’s profitability indicators at the proper level.

One of the economic indicators of the efficiency of organizing the activities of an enterprise is return on sales (hereinafter referred to as RP).

It allows you to determine how profitable the entire process from manufacturing to sales of manufactured products is for the company. This value depends on the indication of gross profit (hereinafter referred to as GP), revenue and other factors.

The concept of profitability and its main types

The RP indicator is very widely used in all sectors of the economy in order to find out how effectively the enterprise uses current costs.

This indicator is measured as a percentage, showing the ratio of profits to expenses. This coefficient shows what share it takes in each ruble earned after the sale of manufactured products.

Exists several types of RP depending on the parameters used when determining it:

1. by value before interest and taxes in each ruble of revenue;
2. according to VP indications (Operating Margin, Gross Margin, Sales margin,);
3. by net profit, part of which falls on 1 ruble of revenue (Profit Margin, Net Profit Margin).

Obtaining net profit is possible only if the company carries out expedient activities aimed at rational use of investments. The coefficient also depends on capital turnover and output volume.

What characterizes this meaning?

The RP parameter is an indicator of economic efficiency that characterizes the company's profitability from production activities.

By its meaning carry out analysis about how rationally the organization uses its available production resources:

If the results of the activities of non-profit structures are analyzed, then this parameter will assess the overall effectiveness of their work. For commercial departments, accurate quantitative characteristics are important when making calculations. RP is similar to efficiency, only the parameters in this analysis are the result obtained as a result of the activity, which is presented as the ratio of costs incurred to the amount of profit received. The more benefits received, the more profitable the production.

At enterprises, RP is an indicator of the organization’s pricing policy and competent cost control. Diversity in the competitive strategies of an enterprise is stimulated by the large difference in the parameters of the RP in different companies. It is widely used to analyze the operational efficiency of organizations.

For information about what this indicator is, the rules and examples of its calculation, see the following lesson:

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Calculation procedure and rules

The RP indicator is calculated in order to to carry out analysis such factors:

• dynamics of company development;
• efficiency of production processes;
• methods of product sales.

The RP value is usually calculated as the ratio of net profit, from which taxes have already been withheld, to the volume of proceeds received from sales for the same period of time.

By gross profit

The RP coefficient calculated using the VP parameter is called in English: GrossProfitMargin.

It is obtained by solving a simple formula - the ratio of VP to revenue:

RPval=VP/V,
where B is revenue.

This parameter shows the size of the VP’s share in kopecks contained in 1 ruble of proceeds.

By operating profit

The numerical value found as a result of the ratio of operating profit to the amount received after the sale of products is the RP for operating profit or also called Return on Sales (ROS).

The formula for determining this parameter is as follows:

where Ebit is operating profit. This value is obtained as the sum of two lines: 2300 “Profit (loss) before tax” and 2330 “Interest payable”;
Tr – proceeds after sales.

In English, operating profit sounds like Earnings before Interests and Taxes.

In this parameter, as in the previous case, you can immediately see the penny share of operating profit included in 1 ruble.

This parameter is an intermediate performance assessment coefficient between sales profit and net profit.

By net profit

The designation Net Profit Margin (Npm) belongs to the term net profit margin. It is determined as a result of the ratio of net profit to total revenue. In this case, they talk about RP, which shows what share of net profit falls on 1 ruble of revenue.

The formula looks like this:

Npm=Pr./Tr,

in which net profit (Tr) is determined by multiplying the price by the number of items sold from the output:

Tr=W*L,
W – price, L – number of units sold.

Net profit =Tr - Total cost - Expenses + Income - Taxes,

where are the indicators “Expenses” and “Incomes” arising from the non-core activities of the enterprise. These include exchange rate differences in currencies, transactions with securities, in the production of other enterprises through, etc.

Balance formula

Another option for calculating the RP indicator is a formula that uses balance sheet data:

RP = profit from sales / amount of revenue

RP = line 050 / line 010 f. No. 2,

where profit from sales is the value from line 050 in form No. 1 of the enterprise; the amount of revenue is reflected in line 010 in form No. 2.

Each of the above calculation options is used in one case or another to analyze the company’s sales activities.

Return on sales ratio

The share of net profit in total sales is determined using return on sales ratio(hereinafter KRP).

It is the most important among other indicators of a company's profitability. The indicator cannot have a negative value and correspond to the current inflation rate. In order for it to show a smaller error in countries with highly developed economies, the coefficient is correlated depending on the industry.

The formula for calculating the coefficient is as follows:

KPR = net profit/sales revenue.

This parameter can be calculated either for individual items (for example, for a specific product) or as a whole for total products. Calculations must be done quite often, because... This is important for organizing rational production at the enterprise, which allows you to stably maintain and increase the flow of profits.

Calculation example

To calculate the RP parameter required for analysis and find out how much net profit the company received from the sale of goods, you need to apply the formula. To make it easier to understand how to calculate RP, let's look at an example.

The company received total sales revenue for the year 2014 amounted to 15.85 million rubles, and in 2015 it increased to 17.51 ​​ml. rub.

The net profit amounted to:

• in 2014 – 3.8 million rubles;
• in 2015 – 4.9 million rubles.

Do you need to determine how the RP has changed?

To answer, you must first find out the KRP for 2014 and 2015. To do this, let’s substitute the initial data into the formula for calculating the CRP given above:

KRP (2014) = 3.8/15.85 = 0.2397 or in terms of net profit RP (2014) = 23.97%.

KRP (2015) = 4.9/17.51 ​​= 0.2798, respectively, and RP (2015) = 27.98%.

Now we need to clarify how the value has changed as follows:

RP (2015) - RP (2014) = 27.98-23.97 = 4.01%.

From the calculations it follows that in 2015 the profitability of sales increased significantly by 4.01%.

Analysis of the results obtained

By analyzing the value of return on sales, the management administration tries to find out how correctly the use of costs is organized in order to make a profit.

In many enterprises this analysis needed for the following:

• stable revenue and increased profits;
• control over the development of the company;
• making comparisons with competing firms;
• detection of profitable and unprofitable products, etc.

The management of the organization must carefully consider measures to increase profits and reduce losses in production activities. What to do if you need to increase your RP? What to do if profitability decreases? Regular monitoring and analysis of the RP level allows you to identify a lot of extremely important information. During the calculations, it becomes clear how production is developing, what needs adjustment, and what factors, on the contrary, do not require changes.

For every business activity, there is no more important goal than to constantly increase your income. To do this, it is necessary to regularly calculate all options for determining profitability and record the results obtained.

The main source of movable capital is revenue received from the sale of products. Therefore, one of the main activities of the subject should be to increase the RP indicator by observing the economy regime, reducing costs, and rational use of enterprise resources.

Due to the fact that the volume of costs for raw materials requires considerable investments, and increasing profitability implies reducing costs, it is necessary to rationally calculate the costs of purchasing materials. This will increase the KRP and increase profits.

Marketing market research will make it possible to establish an improved production of products similar to similar products from competitors and increase customer demand for their products.

Main activities for the use of labor resources affecting to increase profitability, such:

• optimal use of workers employed in production;
• increasing the skills and qualifications of working personnel;
• optimization of costs for departments that are not involved in direct production of products;
• use of automated mechanisms in production;
• promoting staff interest in increasing productivity.

Main factors that may influence to reduce sales profitability, such:

• Expenses are growing faster than revenue from product sales;
• The decline in revenue outpaces the increase in costs;
• There is a decrease in revenue against the background of increasing costs.

The first option is usually associated with an increase in corporate costs with a forced reduction in prices due to the onset of unfavorable market conditions. The second point is characterized by a drop in product sales.

And in the latter case there is a series factors influencing the decrease in RP. These include:

• the need to reduce prices for manufactured products;
• reduction in assortment due to the inability to stop the increase in corporate costs.

It is necessary to analyze these factors and revise the economic policy of the enterprise in order to prevent and gradually increase the RP indicator.

Standard values ​​of this indicator for Russia

RP depends on many factors. The highest indicators are in the trade and mining industries, and the lowest in heavy engineering.

For this parameter influence:

• Industry;
• Region;
• Terrain;
• Kind of activity;
• Seasonality, etc.

According to statistics, in 2014 there were such profitability indicators:

• The maximum number belongs to the mining sector (24-33%) and chemical production (16.7%).
• Large business areas are showing a decrease in profitability due to falling prices and consumption on world markets.
• Enterprises in the small and medium segment of the economy showed a slight increase of about 0.9% of GDP.
  Due to the turbulent geopolitical situation, the profitability of some industries has decreased, but nevertheless growth is observed and economists predict that retail trade could grow by 2.1% per year.

The rules and procedure for calculating profitability are discussed in the following video:

Profitability- a relative indicator of economic efficiency. The profitability of an enterprise comprehensively reflects the degree of efficiency in the use of material, labor, monetary and other resources. The profitability ratio is calculated as the ratio of profit to the assets or flows that form it.

In a general sense, product profitability implies that the production and sale of a given product brings profit to the enterprise. Unprofitable production is production that does not make a profit. Negative profitability is an unprofitable activity. The level of profitability is determined using relative indicators - coefficients. Profitability indicators can be divided into two groups (two types): and return on assets.

Return on sales

Return on sales is a profitability ratio that shows the share of profit in each ruble earned. It is usually calculated as the ratio of net profit (profit after tax) for a certain period to the sales volume expressed in cash for the same period. Profitability formula:

Return on Sales = Net Profit / Revenue

Return on sales is an indicator of a company's pricing policy and its ability to control costs. Differences in competitive strategies and product lines cause significant variation in return on sales values ​​across companies. Often used to evaluate the operating efficiency of companies.

In addition to the above calculation (return on sales by gross profit; English: Gross Margin, Sales margin, Operating Margin), there are other variations in calculating the return on sales indicator, but to calculate all of them, only data on the profits (losses) of the organization are used (i.e. e. data from Form No. 2 “Profit and Loss Statement”, without affecting the Balance Sheet data). For example:

• return on sales (the amount of profit from sales before interest and taxes in each ruble of revenue).
• return on sales based on net profit (net profit per ruble of sales revenue (English: Profit Margin, Net Profit Margin).
• profit from sales per ruble invested in the production and sale of products (works, services).

Return on assets

Unlike indicators of return on sales, return on assets is calculated as the ratio of profit to the average value of the enterprise's assets. Those. the indicator from Form No. 2 “Income Statement” is divided by the average value of the indicator from Form No. 1 “Balance Sheet”. Return on assets, like return on equity, can be considered as one of the indicators of return on investment.

Return on assets (ROA) is a relative indicator of operational efficiency, the quotient of dividing the net profit received for the period by the total assets of the organization for the period. One of the financial ratios is included in the group of profitability ratios. Shows the ability of a company's assets to generate profit.

Return on assets is an indicator of the profitability and efficiency of a company's operations, cleared of the influence of the volume of borrowed funds. It is used to compare enterprises in the same industry and is calculated using the formula:

Where:
Ra—return on assets;
P—profit for the period;
A is the average value of assets for the period.

In addition, the following indicators of the efficiency of using certain types of assets (capital) have become widespread:

Return on equity (ROE) is a relative indicator of operational efficiency, the quotient of dividing the net profit received for the period by the organization’s equity capital. Shows the return on shareholder investment in a given enterprise.

The required level of profitability is achieved through organizational, technical and economic measures. Increasing profitability means getting greater financial results with lower costs. The profitability threshold is the point separating profitable production from unprofitable ones, the point at which the enterprise’s income covers its variable and semi-fixed costs.