How to determine the profit of the enterprise

According to the results of its core business, the company receives a certain income. This amount, net of all expenses for the production and sale of products, as well as tax payments, is net profit. There are several ways to determine the profit of an enterprise.

Instruction manual

1

The manufacturer's activity can be considered quite effective if the profit margin is positive. This is often difficult to achieve, especially in the face of fierce market competition. In one area, several dozens, or even thousands, of firms producing similar goods always work.

2

The choice is always up to the buyer, so it is important to interest him, to make his products more attractive, including at a price. Then the company can get a decent income, but the profit takes into account not only this value, but also the numerous costs associated with the purchase of raw materials, payment of working hours, purchase or rental of equipment, transport, etc.

3

To determine the actual profit of the enterprise, you should subtract from the main income the total amount of apparent costs. To do this, you need the correct data of the balance sheet, which takes into account all movements of funds in the relevant accounts:

ПП = ОД - ЯИ, where ПП - profit of the enterprise, ОД - income from the main activity, ND - obvious costs.

4

Explicit costs are the cost of production. These include expenses for the main production, rental of premises, warehouses, offices, as well as payment for the services of development engineers, lawyers, marketers, managers, accountants, etc. In other words, for a product to appear on the market and be bought, a whole team of specialists works, A lot of resources are being spent It can be concluded that one of the ways to increase profits is to develop methods to reduce the cost of production.

5

Instead of the accounting profit appearing in the reports, financial analysts prefer to calculate economic profit. This value more clearly shows how effective the selected production strategy. It is equal to the difference between the actual profit and the so-called implicit costs:

EP = PP - NI.

6

Implicit costs are not documented. They represent an alternative income that could bring the company a choice of other conditions for the sale of its resources: cash, labor, property, and others.

7

Sometimes, in pursuit of revenue, manufacturers forget that the quality of their products may suffer. In this case, they violate the main entrepreneurial commandment, which indicates the superiority of demand over supply. The main source of profit is the consumer’s money, and he will not give it away for a product that no longer satisfies his physical or aesthetic needs.