How to find profitability
Video: Ratio Analysis - Profitability 2024, July
The profitability of the organization determines how much profit each ruble costs. Therefore, the criterion of cost recovery is the profit of the organization. To determine profitability, you need to calculate several indicators that measure profitability from different perspectives.
You will need
Calculator, Balance of the analyzed enterprise (Form No. 1), profit and loss statement (Form No. 2).
Instruction manual
1
Based on the data of the profit and loss statement (Form No. 2), calculate the return on sales at the beginning and end of the reporting period. Return on sales is calculated as the ratio of profit from product sales to revenue:
Pn = Pn (line 050) / V (line 010) * 100%
An increase in the indicator indicates either an increase in prices or an increase in production costs.
2
Based on the data of the profit and loss statement (Form No. 2), calculate the profitability of products at the beginning and end of the reporting period. Product profitability is calculated by the ratio of profit from product sales to the total cost of this product:
Pn = Pn (line 050) / Sp (line 020) * 100%
An increase in the indicator indicates a decrease in costs per unit or 1 ruble of products, an increase in production volume, an increase in product prices with an improvement in its quality.
3
Based on the data of the profit and loss account (Form No. 2), calculate the profitability of ordinary activities at the beginning and end of the reporting period. The profitability of ordinary activities is calculated as the ratio of net profit to revenue: Rd = PC (line 190) / V (line 010) * 100%
The growth indicator indicates an increase in profit.
4
Based on the balance sheet data (Form No. 1) and the profit and loss statement (Form No. 2), calculate the economic profitability at the beginning and end of the reporting period. Economic profitability is calculated by the ratio of net profit to the average value of current assets:
Roa = FC (line 190) / AOc (line 300) * 100%
The coefficient of economic profitability shows the efficiency of use of property of the enterprise. The growth indicator indicates an increase in sales, an increase in property value.
5
On the basis of the balance sheet data (Form No. 1) and the profit and loss statement (Form No. 2), calculate the return on equity at the beginning and end of the reporting period. Return on equity is calculated as the ratio of net profit to the average value of equity: Rsk = Pch (line 190) / SKs (line 490) * 100%
This ratio shows the efficiency of using equity. Its meaning is that it shows how much profit falls on the unit of equity of the enterprise.
note
In the balance sheet, the beginning of the year is the first column, the end of the year is the second column. In the income statement, the beginning of the year is the second column, the end of the year is the first.
Useful advice
The given indicators are studied in dynamics and from the changes it is possible to judge the effectiveness of the economic activity of the enterprise. Therefore, the coefficients are calculated at the beginning and at the end of the reporting period.
