Return on sales based on net profit - formula. How to calculate return on sales: what is it and how is it calculated Determination of return on sales formula

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 directions of activity 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 indicators characterize the financial results and efficiency of the enterprise. They measure the profitability of an enterprise from various positions and are grouped in accordance with the interests of participants in the economic process and market exchange.

Profitability indicators are important characteristics of the factor environment for generating enterprise profits. Therefore, they are mandatory when conducting a comparative analysis and assessing the financial condition of an enterprise. When analyzing production, profitability indicators are used as a tool for investment policy and pricing.

To determine the efficiency of an enterprise, three profitability indicators will be considered: return on sales, return on assets and return on equity.

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).

It is advisable to begin studying any coefficient with its economic meaning. Return on sales reflects the business activity of an enterprise and determines how efficiently the enterprise operates. The 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.

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

Coef. return on sales = Net profit / Revenue * 100%, % (1)

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:

Coef. rent sales by val. profit = Val. profit / Revenue * 100%, % (2) Coefficient. operating profitability = EBIT / Revenue * 100%, % (3) Coefficient. rent sales by profit before taxes = EBI / Revenue * 100%, % (4)

To calculate all the above profitability indicators, the data contained in the 2nd form of financial statements - “Report on financial results” is sufficient.

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

ROS = EBIT / Revenue * 100%, % (5)

The standard value for this ROS coefficient is > 0. If the return on sales is less than zero, then you should seriously think about the efficiency of enterprise management.

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

Return on assets (ROA) ratio. It shows how much cash is available per unit of assets available to the enterprise. Allows you to evaluate the quality of work of its financial managers.

This ratio shows the financial return from the use of the company's assets. The purpose of its use is to increase its value (taking into account the liquidity of the enterprise), that is, with its help, a financial analyst can quickly analyze the composition of the enterprise’s assets and evaluate their contribution to the generation of total income. If any asset does not contribute to the income of the enterprise, then it is advisable to abandon it (sell it, remove it from the balance sheet). In other words, return on assets is an excellent indicator of the overall profitability and efficiency of an enterprise.

Return on assets is calculated using the following formula:

Return on assets ratio = Net profit / Assets * 100%, % (6)

The result of the calculation is the amount of net profit from each ruble invested in the organization’s assets. The indicator can also be interpreted as “how many kopecks each ruble invested in the organization’s assets brings in.”

The organization's net profit is taken according to the "Income Statement", assets - according to the Balance Sheet.

In Western literature, the formula for calculating return on assets (ROA, Return of assets) is as follows:

ROA = NI / TA *100%, % (7)

where: NI – Net Income (net profit) TA – Total Assets (total assets)

An alternative way to calculate the indicator is as follows:

ROA = EBI / TA *100%, % (8)

where: EBI is the net profit received by shareholders.

The standard for the return on assets ratio, as for all profitability ratios, is ROA > 0. If the value is less than zero, this is a reason to seriously think about the efficiency of the enterprise. This will be caused by the fact that the enterprise operates at a loss.

Coefficientprofitabilityequity(return on equity, ROE). This is a measure of net profit compared to the organization's equity capital. This is the most important financial indicator of return for any investor or business owner, showing how effectively the capital invested in the business was used. Unlike the similar indicator “return on assets,” this indicator characterizes the efficiency of using not all of the capital (or assets) of the organization, but only that part of it that belongs to the owners of the enterprise.

Return on equity is calculated by dividing net profit (usually for the year) by the organization's equity:

Rent. own cap. = Net profit / Equity * 100%, % (9)

A more accurate calculation involves using the arithmetic average of equity for the period for which net profit is taken (usually for the year) - equity at the end of the period is added to equity at the beginning of the period and divided by 2.

The organization's net profit is taken according to the "Income Statement" data, equity capital - according to the liabilities of the Balance Sheet.

A special approach to calculating return on equity is to use the Dupont formula. The Dupont formula breaks down an indicator into three components, or factors, that allow a deeper understanding of the result obtained:

Return on Equity (Dupont Formula) = (Net Income / Revenue) * (Revenue / Assets) * (Assets / Equity) = Net Income Return * Asset Turnover * Financial Leverage (10)

According to average statistical data, return on equity is approximately 10-12% (in the USA and Great Britain). For inflationary economies, such as the Russian one, the figure should be higher. The main comparative criterion when analyzing return on equity is the percentage of alternative return that the owner could receive by investing his money in another business. For example, if a bank deposit can bring 10% per annum, but a business brings only 5%, then the question may arise about the advisability of further running such a business.

The higher the return on equity, the better. However, as can be seen from the Dupont formula, a high value of the indicator can result from too high financial leverage, i.e. a large share of borrowed capital and a small share of equity capital, which negatively affects the financial stability of the organization. This reflects the main law of business - more profit, more risk.

Calculating return on equity makes sense only if the organization has equity capital (i.e., positive net assets). Otherwise, the calculation gives a negative value that is of little use for analysis.

Standard value of return on sales by industry

Calculating the standard value of return on sales for industrial enterprises and other organizations is extremely important in company management. Knowing these indicators, it is possible to conduct a qualitative economic analysis and improve the efficiency of the enterprise. If a company wants to maintain its position in the market or even improve it, then it is very important to carry out such calculations over short periods. This will not only allow you to better manage the organization, but will also make it possible to respond in a timely manner to any changes in the market.

Basic Concepts

Before you understand what the standard value of return on sales is, you need to understand what it is. In accounting, this concept means an economic indicator, by determining which one can determine the level of efficiency in the use of certain resources in an enterprise. Moreover, not only material assets are taken into account, but also natural and labor resources, investments, capital, sales, etc. In simpler terms, profitability refers to the level of profitability of a business, its economic efficiency and the benefits it brings.

Thus, it turns out that if the profitability indicator is below zero, then such a business is unprofitable, and we urgently need to improve this indicator, find out what influenced the occurrence of this situation and eliminate the causes of the problem. The level of profitability is usually expressed in ratios, but relative indicators are expressed for profitability of sales as a percentage. The standard value can also indicate the efficiency of exploitation of the enterprise's resources; with normal values, the organization will not only cover costs, but also make a profit.

Profitability indicators

When calculating all indicators, it is very important to pay attention to such a concept as the profitability threshold. This indicator, or more precisely, the period, actually stands for the division of the unprofitable and effective state of the company. It serves as a comparison to the break-even point, reflecting the point at which an unprofitable business became effective. To analyze the company's performance, it is necessary to compare actual profitability indicators with planned ones. In addition, the comparison uses data from past periods and indicators of competing companies. But the coefficients, or, as they are also called, sales indices, are determined by calculating the ratio of total income to fixed assets and flows.

Main groups of standards

The standard value of return on sales and profitability can be divided into certain groups, namely:

• Return on sales (profitability of the enterprise).
• Profitability of non-current assets.
• Return on current assets.
• Return on personal capital.
• Product profitability.
• Profitability of production assets and profitability of their use.

Using these indicators, taking into account the company’s field of activity, one can determine its overall profitability. To determine the return on assets, it is necessary to determine the efficiency of exploitation of the company’s equity capital or its investment funds: it all depends on how the company’s assets bring it profit, how much of it, taking into account the resources spent on production. To calculate the return on assets, the ratio of profit for a specific period of time to the size of the enterprise's assets for the same period is used. The formula looks like this:

• R assets = P (profit) / A (size of assets).

The same indicators are used in economics to calculate the profitability of operating production assets, investments and equity capital. For example, by calculating the return on equity of a joint-stock company, you can find out how effective the shareholders' investments in this industry are.

Profitability calculation

Return on sales (normative value) is an indicator of profitability, which is expressed in coefficients and is a display of the share of income for each cash equivalent spent. To calculate the profitability of a company's sales, the ratio of net profit to the amount of proceeds is calculated. Calculations are carried out according to the formula:

• R cont. = P (net income) / V (revenue volume).

This indicator is directly influenced by the organization’s pricing policy, as well as its flexibility in the market segment where its products are used. To increase their own profits, many companies use various external and internal strategies, as well as analyze the activities of competitors, the range of products they offer, etc. There are no clear schemes, norms, or designations of profitability. This directly depends on the fact that the standard value of return on sales is directly related to the specifics of the organization’s activities. All indicators can only reflect the overall performance of the company for a specific period.

Basic formulas

In order to effectively manage sales and monitor the performance of the organization, calculations of the profitability of the enterprise are carried out. To do this, it is customary to use certain indicators, namely: gross and operating EBIT profit, balance sheet data, net return on sales. Calculation of profit taking into account the gross income indicator shows a coefficient indicating the share of growth from each earned cash equivalent. To calculate this indicator, take the ratio of net income after paying taxes to the total amount of funds for a specific period of operation of the organization. In other words, operating margin equals gross income divided by trading revenue.

It is worth noting that this coefficient must be included in the financial statements. But operating profit EBIT is equal to the ratio of EBIT to total revenue. Moreover, this indicator reflects the total income before all interest and taxes are subtracted from it. It is by this formula that the operating profitability of sales, the standard value in production, as well as other important values ​​are calculated. It is believed that this coefficient is between the general profit data and the organization’s net earnings.

Profitability ratios

But the profitability of sales on the balance sheet is a coefficient, the calculation of which is carried out on the basis of data from accounting reports and represents a characteristic of the share of profit from the total revenue of the organization. This coefficient is calculated using the formula for the ratio of total income or loss from product sales to the volume of revenue. To get results, you just need to use ready-made data from the company’s balance sheet.

The calculation of net return on sales is carried out by the ratio of net profit after all payments to total revenue. To carry out independent calculations of the standard value of profitability of sales in trade, you need to find out how much product was sold and what income the organization received from this sale after paying all taxes, taking into account other expenses related to operating activities, but without affecting non-operating expenses .

Analysis of results

Thanks to all these formulas, company specialists can calculate a wide variety of types of profit relative to total revenue. But still, the dependence on the specifics of the main direction of the enterprise’s work remains quite significant. If the return on sales, standard value and other coefficients have been calculated for several periods of the organization’s activity, then the company’s employees will be able to make a qualitative economic analysis. That is, these indicators will help to conduct operational management of the economic activity of the enterprise. In addition, this will allow you to quickly respond to fluctuations and changes in the market, which will undoubtedly help improve performance indicators and provide the company with a constant income.

Indicators reflecting the standard value of return on sales are used in calculations of operational activities. But it is not worth using them for long-term periods, since changes in the market occur quite often, and with such calculations it will not be possible to respond to them in a timely manner. They will help solve daily and monthly tasks, helping to make plans for the sale of manufactured products.

Increased profitability

There are ways to increase the standard value of profitability of sales. Among them, the most common are the following: reducing production costs by reducing the cost of producing goods and increasing the volume of goods produced, which will increase gross revenue. But in order to effectively use these methods, the organization must have sufficient labor and material resources. Again, to conduct such events, you need to work with highly qualified employees or increase the level of professionalism of your staff through various trainings and using new methods and practices of the global economy that improve the skills of workers.

In order to increase the standard value of return on sales based on net profit, it is important to study what positions the organization’s competitors occupy, what their pricing policy is, and whether they are holding promotions or other attractive events. And already having this data, you can analyze which factors are advisable to use to reduce production costs. Moreover, for analytical activities one should use not only data about competitors in the region, but also use information about the leaders of a given market segment.

Conclusion

To increase sales profitability indicators, the standard value for industries must be calculated using all the necessary formulas and an analysis of the obtained data must be carried out. It is worth considering that increasing the efficiency of an enterprise is influenced not only by its pricing policy, but also by the range that it can offer to its consumers.

Most often, the best solution to reduce production costs is to introduce modern technologies into production. To understand whether this method will improve production, it is necessary to conduct an economic analysis and find out what costs are needed for this, how long it will take for employees to master new equipment, and how long it will take for this investment to pay off.

Profitability indicators

Profitability is an indicator of the effectiveness of one-time and current costs. In general, profitability is determined by the ratio of profit to one-time or current costs through which this profit was obtained.

Dynamics of profitability indicators of OJSC "UMZ" for 12/31/2009 - 12/31/2014 G.G. Presented in table No. 5.

Table 5

The values ​​of profitability indicators of OJSC "UMZ" for the entire period under review are presented in table No. 5a.

Table 5a

Considering profitability indicators, first of all, it should be noted that both at the beginning and at the end of the analyzed period, the amount of profit before tax divided by sales revenue (an indicator of overall profitability) is at UMP LLC below the industry average, which is set at 10.0 %. At the beginning of the period, the overall profitability indicator for the enterprise was 4.1%, and at the end of the period -88.3% (change in absolute terms for the period - (-92.5%)). This should be viewed as a negative point and ways to improve the efficiency of the organization should be sought.

The increase in return on equity from 0.50% to 3.63% for the analyzed period was caused by an increase in the enterprise’s net profit for the analyzed period by 35,591.3 thousand rubles.

As can be seen from Table No. 5, during the analyzed period the values ​​of most profitability indicators increased, which should rather be considered as a positive trend.

Financial stability analysis

An analysis of changes in financial stability indicators of UMP OJSC in absolute terms for the entire period under review is presented in Table No. 6.

Table 6

An analysis of financial stability indicators for the entire period under review is presented in Table No. 6a.

Table 6a

An analysis of changes in financial stability indicators of UMP OJSC in relative terms for the entire period under review is presented in Table No. 7.

Table 7

An analysis of financial stability indicators for the entire period under review is presented in Table No. 7a.

Table 7a

Carrying out an analysis of the type of financial stability of an enterprise in absolute terms, based on a three-complex indicator of financial stability, stagnation of the financial stability of the enterprise is noticeable in dynamics.

As can be seen from table No. 6, both at the end of December 31, 2009, and at the end of December 31, 2014, the financial stability of UMP LLC according to a 3-complex indicator can be characterized as “Absolute financial stability”, since the enterprise has enough of its own funds to form reserves and expenses.

An analysis of financial stability by relative indicators, presented in table No. 6a, suggests that compared to the base period (December 31, 2009), the situation at UMP LLC remained generally at the same level.

The indicator “Autonomy coefficient” increased by 0.06 during the analyzed period and at the end of December 31, 2014 it amounted to 1.02. This is higher than the standard value (0.5) at which borrowed capital can be compensated by the property of the enterprise.

The indicator "Ratio of debt and equity (financial leverage)" during the analyzed period decreased by -0.06 and at the end of December 31, 2014 amounted to -0.02. The more this ratio exceeds 1, the greater the enterprise's dependence on borrowed funds. The acceptable level is often determined by the operating conditions of each enterprise, primarily by the rate of turnover of working capital. Therefore, it is additionally necessary to determine the rate of turnover of inventories and receivables for the analyzed period. If accounts receivable turn over faster than working capital, which means a fairly high intensity of cash flow to the enterprise, i.e. the result is an increase in own funds. Therefore, with a high turnover of tangible working capital and an even higher turnover of accounts receivable, the ratio of equity and borrowed funds can greatly exceed 1.

The indicator "Ratio of mobile and immobilized assets" during the analyzed period decreased by -0.14 and at the end of December 31, 2014 it was -0.04. The ratio is defined as the ratio of mobile funds (total for the second section) and long-term receivables to immobilized funds (non-current assets adjusted for long-term receivables). The standard value is specific to each individual industry, but all other things being equal, an increase in the coefficient is a positive trend.

The indicator "Maneuverability coefficient" during the analyzed period decreased by -0.07 and at the end of December 31, 2014 it amounted to -0.02. This is below the standard value (0.5). The agility coefficient characterizes what share of sources of own funds is in mobile form. The standard value of the indicator depends on the nature of the enterprise’s activities: in capital-intensive industries, its normal level should be lower than in material-intensive ones. At the end of the analyzed period, UMP LLC has a light asset structure. The share of fixed assets in the balance sheet currency is less than 40.0%. Thus, the enterprise cannot be classified as a capital-intensive industry.

The indicator “Coefficient of provision of inventories and costs with own funds” during the analyzed period decreased by -0.50 and at the end of December 31, 2014 it amounted to 0.90. This is higher than the standard value (0.6-0.8). The coefficient is equal to the ratio of the difference between the sum of sources of own working capital, long-term loans and borrowings and non-current assets to the amount of inventories and costs.

31.Analysis of profitability indicators.

Profitability - This is a relative indicator of production efficiency, characterizing the level of return on costs and the degree of use of capital and resources, which is a measure of the profitability of the enterprise in the long term. The construction of profitability ratios is based on the ratio of profit (most often, net profit is included in the calculation of profitability indicators) either to the funds spent, or to sales proceeds, or to other assets of the enterprise. Profitability ratios can be calculated as ratios and then presented as a decimal fraction or as profitability ratios and then presented as a percentage.

Profitability indicators are calculated on the basis of the Balance Sheet Form 1 and the Statement of Financial Results of the Enterprise Form 2. The calculation of profitability indicators can be based on various amounts of enterprise profit: marginal profit, operating profit, earnings before interest and income tax (EBIT), profit before income tax (EBT), net profit. Most often, net profit or earnings before interest and income taxes are used to calculate profitability ratios.

Factors influencing profitability are, on the one hand, capital used, providing the opportunity for productive activity and profit , with another - revenue from the sale of manufactured products, property, etc. . (turnover), as a source of income funds for the enterprise and profit generation. Based on the purposes of the analysis, various combinations of profit are used in relation to the indicators for which their return (efficiency of use) is studied, which allows us to construct many different indicators (Table 15.1): 1) economic profitability (of assets), return on equity capital, profitability of used capital production, return on current assets, return on net assets, etc. (resource approach); 2) profitability of turnover (sales); 3) profitability of products sold, profitability of individual types or groups of products, return on investment, etc. (cost approach).

Let's consider the analysis scheme using the example of one of the profitability indicators (return on sales).

To analyze the factors influencing the profitability of turnover, we will use the technique of chain substitutions. The change in profitability is influenced by two factors: profit after tax (depending on the purposes of the analysis, profit of the reporting period, profit before tax, profit from ordinary activities can be used) and sales revenue

. This, in turn, is affected by changes in sales volume and structure, cost and price of products sold. The value is also influenced by these factors. Therefore, when analyzing the profitability of sales (turnover), the influence of these factors on the change in both and is examined.

The first step is to calculate the planned profitability of turnover at planned profit

and planned revenue

(15.1):

, (15.1)

The second step is to calculate the profitability of turnover

provided that the profit

and revenue of the reporting period from sales (turnover) of products

recalculated to the sales volume of the reporting period

without changing the price and cost of production (15.2):

(15.2)

The third step is calculating the profitability of turnover

subject to taking into account the impact of changes in profit due to changes in the factor “average price at which products are sold” Calculations begin with determining the amount of profit

and revenue of the reporting period from sales (turnover) of products

, which the enterprise could receive with actual sales volumes; the structure of commercial products, actual prices, and the basic (planned) cost value (the influence of this factor is excluded). When performing a similar calculation, from the sales volume for the reporting period, production costs (cost) of products of the base period, recalculated to the sales volume of the reporting period (fact) are subtracted.

, (15.3)

due to changes in profit

and revenue

under the influence of the factor “production costs (cost of production)”, we proceed from the assumption that when comparing profits in actual volumes, with the actual structure of products sold, with actual prices and actual costs, with the profit that the enterprise could receive with the base (planned) the amount of costs and the actual values ​​of other factors, reflected the impact on profit of changes in the costs of its production (under the influence of an increase/decrease in the volumes of sold products of those products that have a higher/lower cost). To do this, it is necessary from the profit of the reporting period

subtract the amount of profit that the enterprise could receive with the base (planned) cost value, but with the actual values ​​of all other factors. The calculation is performed according to formula (15.4):

, (15.4)

When analyzing the impact of changes in profitability of turnover

due to the actual change in profit and revenue of the reporting period from sales in formula (15.4) instead of the planned value

substitute its actual value (15.5):

, (15.5)

Assessing profitability indicators gives an idea of ​​how efficiently the enterprise carries out its activities, controls the costs of production and sales of products, and what net profit it receives. There is no standard value for profitability ratios, but there is a general rule: the profitability value should be at such a level that the liquidity of the enterprise is ensured. This does not mean that the higher the coefficient, the better. A significant increase in profitability during the reporting period may lead to a significant decrease in liquidity. When planning profitability ratios, an enterprise always needs to decide what is more important at this stage: profitability or liquidity.

All indicators themselves can be useful to compare:

their change over time;

actual results with forecast;

business units among themselves;

with industry average indicators, which allows you to determine the place of the enterprise among other enterprises in the industry.

Enterprise profitability indicators

Profitability– the ability of an enterprise to generate profit.

Return on sales measures how much of a company's revenue is profit.

The return on sales formula is calculated for a certain period of time, the unit of measurement is percentage. The general formula for finding return on sales is as follows:

Рп=(П/В)*100%,

where Рп – profitability of sales,

P – enterprise profit,

B is the company’s revenue.

Types of profitability of sales

When calculating return on sales, different types of profit are used, so there are different versions of the return on sales formula. Let's look at the most common types of return on sales:

• Return on sales in accordance with gross profit, which is calculated as the quotient of gross profit divided by revenue (in percent):

  Rp(VP)=(Pval/V)*100%

• Operating return on sales, which is the quotient of profit before tax divided by revenue (as a percentage):

  Rp(OP)=(Pop/V)*100%

• Return on sales in accordance with net profit, which is the quotient of net profit divided by revenue (in percent):

  Rp(ChP)=(Pch/V)*100%

What does the return on sales formula show?

Using the return on sales formula, you can find a coefficient that shows what part of the profit will come from each ruble earned. The values ​​​​found using the profitability formula will differ for each enterprise, since their product range and competitive strategies differ.

Most common three types of return on sales and they show:

• Gross profit margin shows how many percent of gross profit is in each ruble of goods sold;
• Operating return on sales will show what share of profit will be accounted for for each ruble that is received from revenue from which interest and taxes have been paid;
• Return on sales based on net profit reflects what share of net profit will fall on each ruble earned.

Determining the profitability of sales helps to optimize the pricing policy of the enterprise, as well as costs that relate to commercial activities.

The meaning of the return on sales formula

Return on sales is often called the profitability rate, since this indicator reflects the share of profit in revenue.

When analyzing the coefficient that characterizes the profitability of sales, it is important to note that if the profitability of sales decreases, this indicates a decrease in the competitiveness of the product and a decrease in demand for it. Then the company’s management should think about carrying out events that help stimulate demand, increase the quality of products sold, or conquer a new niche in the market.

By identifying trends in changes in the profitability of sales over time, economists distinguish between the reporting and base periods. As the base period, the indicators of previous years (years) when the company received the greatest profit are used.

Formula for calculating profitability of sales on the balance sheet

Determining the base period is necessary to compare the return on sales ratio for the reporting period with the ratio that is taken as the basis.

Examples of problem solving

Profitability calculation

The concept of profit from sales

The commercial activities of any company in most cases are aimed at generating profits to cover losses (costs).

Profit includes the net income that a company receives in the process of carrying out certain business activities (sale or production of goods, provision of services). The concepts of profit and revenue cannot be considered equivalent, since profit is determined by subtracting from revenue the main cost items for production, among which are:

• Cost of goods (services),
• Payment of taxes (income tax, excise taxes, VAT, etc.),
• Export taxes, etc.

The following components of any company’s work depend on the sales profit indicator:

• Efficient operation of enterprises,
• Solvency,
• Degree of liquidity.

An enterprise can use profits from sales to finance itself, which leads to an increase in the pace of modernization and automation of the production process.

Sales profit formula

There are many ways to calculate company profits, but the basic formula for sales profits looks like this:

Pr=Vyr-Seb-Nal

Here Pr is the amount of profit from sales,

Vyr – the amount of revenue from sales,

Cash - taxes,

Seb – cost of goods (services).

According to the second calculation option, profit from product sales is calculated as follows:

Pr=VP-Rupr-Rcom

Here VP is the amount of gross profit,

Rupr – administrative expenses,

Rcom – expenses of a commercial nature.

Factors affecting sales profits

The sales profit indicator depends on many internal and external factors.

Internal factors influencing sales profit are:

• The quantity of products sold (manufactured), which depends directly on profitability (as profitability increases, sales and profit from sales increase).
• Assortment structure.
• Product prices (as prices rise, profit margins increase).
• Cost (as it increases, profit decreases; by reducing cost, profit margins can be increased).
• Business expenses.

External factors do not have a direct impact on the amount of profit from sales; they do affect the final volume of products, including its cost. The following external factors can be listed:

• Deductions for depreciation,
• State influence
• Conditions of nature
• Market sentiment (impact of supply and demand), etc.

Functions of profit from sales

The formula for profit from the sale of goods (services) is used in the process of analyzing the economic activities of enterprises for a deep understanding of the definition of profit.

Using the most important functions of profit from sales, a manager can:

• Characterize the final result of the company’s activities,
• Identify indicators such as efficiency and stability,
• The incentive function, subject to increasing profits from sales, makes it possible to increase wages, introduce new technologies, increase the rate of renewal of fixed assets,
• Make deductions of taxes and other payments to the state budget, carrying out the fiscal function of profit;
• Implement measures in the field of optimization of the production process through the profit control function.

Examples of problem solving

Return on sales is an indicator of the economic efficiency of activities. It is expressed as a percentage and allows you to determine the share of profit in the company's revenue.

For the calculation, you will need data on profit and sales volume for a certain period.

Calculation formula

Рп = (P/Op) x 100%, where:
P - profit;
Op - sales volume.

The above is the general formula. Depending on the final goals of the analysis, you can take the values ​​of operating, gross or net profit for calculation. Indicators must be reduced to numbers of the same order (if sales volume is in millions, then profit should also be in millions).

Calculation example

Initial data for calculating the profitability of sales of an online store of handicraft goods for the first quarter. 2015:

• gross profit - 275 thousand rubles;
• revenue - 632 thousand rubles.

Gross profit margin - 43.5%.

To understand whether the company performed more efficiently in the first or second quarter, you need to compare the indicators of these periods. For example, revenue in the second quarter amounted to 840 thousand rubles, and gross profit - 322 thousand rubles. Profitability, respectively, is 38.3%. Thus, in the II quarter. in each ruble received, the share of profit was 5.2% less than in the first.

Why do you need to calculate profitability?

The calculation is necessary to analyze the financial and economic activities of the company. The indicator can act as an estimate when comparing two companies. In this case, costs and pricing policies of enterprises are compared.

The higher the value, the more efficiently resources are used and the more competent pricing policy of the enterprise is pursued. A low indicator indicates problems with profitability.

How to calculate profitability as a percentage?

You can increase it in different ways; usually you need a set of measures aimed at:

• cost reduction;
• increasing the final price of the product;
• review of the composition of the manufactured product;
• withdrawal of unprofitable units from circulation.

It is best to analyze dynamics over several months or years. This will allow you to trace the general trend and identify the weaknesses of the enterprise.

Profitability in dynamics using the example of an online store for handicrafts

Table 1. Profitability of an online store over time

Image 1. Profitability of an online store over time

In the online store from the first quarter. 2013 to Q1 In 2015, there was an increase in profitability by 11.5%. At the same time, the graph shows fluctuations in the II and III quarters. 2013 and 2014 The drawdown is associated with the seasonality of demand for handicraft goods. The peak of sales is observed in the winter period before the New Year; at this time, ready-made sets that are taken as gifts are in demand. In general, the store's dynamics are positive.

Questions and answers on the topic

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Analysis of the efficiency of an organization is impossible without taking into account profitability indicators. An indicator characterizing the profitability of an activity or, in other words, economic efficiency is the concept of profitability.

This parameter demonstrates how effectively the company uses available economic, labor, monetary and natural resources.

For non-profit structures, profitability is the main indicator of operational efficiency, and in commercial divisions, quantitative characteristics calculated with greater accuracy are important.

Therefore, there are many types of profitability: profitability of production, profitability of products, return on assets, etc.

But, in general terms, these indicators can be compared with efficiency indicators, the ratio between the costs incurred and the resulting profit (the ratio of expenses to income). A business that generates profit at the end of reporting periods is profitable.

Profitability indicators are necessary to carry out financial analysis of activities, identify its weaknesses, plan and implement measures to increase production efficiency.

Types of profitability are divided into those that are based on the cost approach, the resource approach or the approach that characterizes the profitability of sales.

Different types of profitability calculations have their own objectives and use many different accounting indicators (net profit, cost of production, selling or administrative expenses, sales profit, etc.).

Profitability of core activities.

Refers to cost indicators and characterizes the efficiency of not only the company’s core activities, but also work related to the sale of products. Allows you to evaluate the amount of profit received per 1 ruble spent.

This takes into account the costs associated with the direct production and sale of core products.

It is calculated as the ratio between profit from sales and the amount of cost of production, which includes:

• cost of goods, works, products or services sold;
• cost of business expenses;
• cost of administrative expenses.

Characterizes the organization’s ability to independently cover expenses with profit. Calculating the profitability of an enterprise is used to assess the efficiency of its work and is calculated using the formula:

Genus = Prp/Z,
Where Z are costs, and Prp is the profit received from sales.

The calculations do not take into account the time elapsed between production and sale.

Return on current assets.

The profitability of current assets (otherwise known as mobile, current) assets shows the profit received by the organization from each ruble invested in current assets and reflects the efficiency of using these assets.

Defined as the ratio between net profit (i.e., remaining after tax) and current assets. This indicator is intended to reflect the organization's ability to provide a sufficient amount of profit in relation to the working capital used.

The higher this value, the more efficiently working capital is used.

Calculated by the formula:

Rotot = Chn/Oa, where

Rtot is the overall profitability, net profit is Chp, and Oa is the cost of current assets.

Internal rate of return.

A criterion used to calculate the effectiveness of an investment. This indicator allows you to assess the feasibility of investing in investment projects and demonstrates a certain discount rate at which the net cost of funds expected in the future will be equal to zero.

This refers to the minimum rate of return when the investment project under study assumes that the minimum desired rate of return or the company's cost of capital will exceed the lower internal profitability rate.

This calculation method is not very simple and involves careful calculations. In this case, inaccuracies made during the calculation can lead to final incorrect results.

In addition, when considering investment projects, other factors are taken into account, for example, gross profitability. But it is on the basis of calculating the internal rate of return that the enterprise makes investment decisions.

Profitability of fixed assets.

The presence of profit as an absolute indicator does not always allow one to obtain a complete picture of the efficiency of an enterprise. For more accurate conclusions, relative indicators are analyzed, showing the effectiveness of specific resources.

The process of operation of some enterprises depends on certain fixed assets, therefore, in order to generally improve the efficiency of operations, it is necessary to calculate the profitability of fixed assets.

The calculation is carried out according to the formula:

Ros = Chp/Os, where

Ros - profitability of fixed assets, Chp - net profit, Os - cost of fixed assets.

This indicator allows you to get an idea of ​​what part of the net profit is accounted for per unit of cost of the organization's fixed assets.

Calculation of profitability of sales.

The indicator reflecting net profit in total revenue demonstrates the financial performance of the activity. The financial result in the calculations can be different profit indicators; this leads to the existence of several variations of the indicator. Most often these are: profitability of sales by gross profit, by net profit and operating profitability.

What is the return on sales formula? Find the answer in this article.

Formulas for calculating profitability of sales.

For gross profit: Рппп = Вп/В, where Вп is gross profit, and В is revenue.

Gross profit is the difference between revenue received from sales and cost of sales.

For net profit: Rchp = Chp/B, where Chp is net profit, and B is revenue.
Operating profitability: Op = EBIT/B, where EBIT is profit calculated before taxes and deductions, and B is revenue.

The optimal value of return on sales depends on the industry and other characteristics of the enterprise.

Thus, in organizations that use a long production cycle, such profitability will be higher than those companies that operate with high turnover, although their efficiency may be the same.

Sales efficiency can also show the profitability of products sold, although it takes into account other factors.

Profitability threshold.

It also has other names: critical volume of production or sales, critical point, break-even point. Designates the level of business activity of an organization at which total costs and total income are equal to each other. Allows you to determine the margin of financial strength of the organization.

Calculated by the following formula:

Pr = Zp/Kvm, where

Pr is the profitability threshold, Zp is fixed costs, and Kvm is the gross margin ratio.

In turn, the gross margin coefficient is calculated by another formula:

Vm = B – Zpr, where Vm is the gross margin, B is revenue, and Zpr is variable costs,
Kvm = Vm/V.

The company incurs losses when sales volume is below the profitability threshold and makes a profit if this indicator is above the threshold. It is worth noting that as sales volume increases, fixed costs per unit of production decrease, but variable costs remain the same. The profitability threshold can also be calculated for individual types of services or products.

Cost effectiveness.

It characterizes the return on funds spent on production and shows the profit received from each ruble invested in production and sales. Used to evaluate the effectiveness of spending.

It is calculated as the ratio between the amount of profit and the amount of expenses that brought this profit. Such expenses are considered decapitalized, written off from the balance sheet asset, and presented in the report.

The cost return indicator is calculated as follows:

Pz = P/Dr, where P is profit, and Dr is decapitalized expenses.

It should be noted that the calculation of cost-effectiveness indicators demonstrates only the degree of return on expenses spent on specific areas, but does not reflect the return on invested resources. This task is performed by return on assets indicators.

Factor analysis of cost-effectiveness.

It is one of the parts of financial analysis and, in turn, is divided into several models, of which the most commonly used are additive, multiplicative and multiple.

The essence of constructing such models is the creation of a mathematical relationship between all the factors under study.

Additive ones are used in cases where the indicator will be obtained as the difference or sum of the resulting factors, multiplicative - as their product, and multiples - when the factors are divided into each other to obtain the result.

Combinations of these models produce combined or mixed models. For a full factorial analysis of profitability, multifactor models are created that use various profitability indicators.

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.