How to calculate the profitability of services

Profitability of services shows how efficiently an enterprise operates, whether it makes a profit, whether its expenses are covered. This relative indicator is most often expressed as a percentage.

Instruction manual

1

Before proceeding with the calculations, refer to form No. 2 of the financial statements (Profit and Loss Statement). Define all cost items that affect the formation of the cost of services, not taking into account the Balance.

2

Calculate the profitability of services (Ru) by the ratio of profit or loss from the sale of services (Pru or Uru) to the sum of all costs of services sold (Zru). The visual formula for the calculation is as follows:

Ru = Pru / Zru, or Ru = Uru / Zru, if a loss occurs as a result of the sale of services.

3

To determine the cost indicator, calculate the cost of services. To do this, add the cost of services sold, selling and management expenses. And since profitability is relative, multiply it by 100%.

4

Profitability indicator characterizes the profit of the organization, received from each monetary unit spent on the production of services. If necessary, profitability can be calculated both for the entire enterprise, and for each type of service separately.

5

By calculating the cost-effectiveness of services, you can easily determine which services are more profitable and whether it is possible to reduce the cost of any other service. Calculate the planned profitability of services in case the organization is going to introduce a new type of service.

note

It happens that when implementing new types of services, an enterprise invests a significant amount of funds in this direction. This can be advertising projects that promote services, staff development costs, one of the tasks of which will be the provision of a newly introduced service. In this case, for a specific period of time, an enterprise may become unprofitable, but if everything is done correctly when introducing a new service, then over time the costs will pay for themselves, and the profitability indicator will again become the same or even increase.