How to determine the income of the company

Business organization is not an easy task. Especially if you have to manage a large staff and a large number of assets. Each manager must remember one rule, without which management is impossible: the primary task of any enterprise is to make a profit. Further, such management tools as short-term and long-term planning, economic analysis, accounting and management accounting come into play.

Instruction manual

1

So how to determine the income of the enterprise? To begin with, you need to figure out what this same income may consist of. Firstly, it is cash received directly from the sale of goods (produced or resold) or services. In other words, the gross margin of the enterprise. Oddly enough, the second component of profit is costs.

Costs - this is the money spent on the production or sale of goods, or the provision of services. Costs are constant and variable. Fixed costs are the costs of management and administration, remuneration of labor, maintenance of assets (i.e. production capacities, buildings and structures), rent, etc.

2

Variable expenses include money spent on the purchase of the material from which the goods were produced, or on the purchase of the goods themselves (if we are talking about resale). In the case of the provision of services, the costs of their provision.

3

So, the last on the list, but far from being significant, was the profit component - taxes. Why is the last on the list? It's simple - the tax is calculated based on the tax base and interest rate. The tax base, in turn, is calculated based on gross income and expense.

4

Result: income (or net profit) of the enterprise = gross profit - (variable costs + fixed costs) - taxes.

Thus, you have received four indicators that can be calculated in monetary terms. So, having calculated them, you can easily calculate the income of the enterprise. In addition, these indicators are the main levers of planning and analysis. With their help, you can predict income, optimize costs.