What is profitability in simple terms? Product profitability formula Return on goods sold formula

When market entities conduct business activities, it is necessary to constantly analyze its results and the effectiveness of the efforts expended, as well as draw conclusions about the prospects for business development.

This is an indicator of profitability from the activities of the enterprise. The parameter shows how efficiently resources (natural, economic, labor, financial) are used. In a non-profit structure, profitability (P) is considered operational efficiency. In business, accurate numbers are important. It is compared with efficiency - the ratio of total costs to total income. If at the end of the reporting year you are in the black, the business is considered profitable.

Main types

• General return on assets(and non-current). The characteristic shows which financial resources were used by the company in order to obtain a profit equal to 1 ruble. It is calculated from the ratio of income before payment of all taxes, as well as the value of the company’s existing assets for a specific time period (year, month, quarter). It is calculated by dividing income (before tax) by the average total cost of attracted assets for the same period of time;
• Product R.– the ratio between sales revenue and costs;
• R. production. Characterizes the feasibility of doing business, shows the ratio of costs to the final net income. Production is considered profitable if there is a positive balance. To increase the indicator, measures are taken to reduce costs and improve product quality.

Other types of profitability, calculation formulas

For the most complete disclosure of the concept, we will provide visual calculation schemes.

1. ROA = Profit ⁄ Asset Value × 100%, where ROA – R. assets. Own and borrowed funds (accounts receivable, loans) are taken into account.
2. ROFA R. fixed assets (F). The indicator is similar to the previous one.
3. ROE = profit ⁄ capital × 100%, where ROE – R. capital. The ratio indicates how effectively the enterprise's own funds are used. The difference between asset and liability efficiency shows the amount of borrowing that is used in the business. The main coefficient when analyzing activities in developed countries.
4. ROI – R. investments. The relationship between income and the amount of initial investment. Let's look at stocks as an example. The investor bought Gazprom securities for 149.5 rubles, but noticing a decline in the market, sold them for 135.2 rubles. The loss amounted to 14.3 rubles. The result is a negative investment efficiency of 9.56% (14.3 ⁄ 149.5 × 100% = -9.56%). The ROI coefficient cannot be considered the main indicator of the company’s successful activities, because it cannot reflect situations that arise with operational flows (loans). But still the main turnover is reflected clearly.

The analysis of economic activities is carried out taking into account current and one-time costs. The following coefficients are distinguished:

• ROM R. products. Indicates the ratio of income from product sales to its cost. Calculated for all supplied goods and for individual types. Formula:

Rp= (P / Sp) × 100%,
where Рп – Р. products, П – profit received from sales, Сп – production cost.

• The production profitability ratio assesses the degree of efficiency in the use of the organization's property (PF and ). Formula:

Rp= (Pb / (Fund. + Fund. Funds)) × 100%,
where Рп – R. of production (%), Pb – balance sheet profit (thousand rubles), Phos. fund – cost of fixed assets (average for the year, thousand rubles), Fund. funds – size of fixed assets (thousand rubles) .

Additional views

• Coefficient profitability of sales– ROS (return on sale). It is calculated by the ratio of net income from the sale of goods to the company’s revenue. The parameter reflects the percentage of profit in each ruble earned. Based on this, prices are formed and the company's costs are displayed.
• ROL – Personnel R.. The relationship that arises between the net profit of an enterprise and the average number of employees. It is necessary to comply with a quantitative threshold to obtain maximum income.
• R. contracting services. The parameter is obtained by dividing the difference between the costs of performing the work. Calculated using the formula: Rsub.services = (Znepred. - Zrepresentation) / Zrepresentation. If the contractor fails to fulfill its obligations, it will suffer losses that will be associated with fines.

Conclusion

When doing business, analyze the results of your work and evaluate the effectiveness of your efforts.

The formula for product profitability on the balance sheet does not require data from Form No. 1 (balance sheet). All the necessary information can be gleaned from Form No. 2 (financial results report).

The profitability of products on the balance sheet is calculated for the corresponding period of time, and the unit of measurement of the profitability indicator is percentage.

Let's consider the general formula for product profitability on the balance sheet to calculate the efficiency of product sales:

Rpr=(Pr/Vyr)*100%,

where Rpr is a profitability indicator,

Pr – amount of profit,

B – sales revenue.

In addition to the revenue indicator, the formula for product profitability on the balance sheet can be calculated in accordance with the cost:

Rpr=(Pr/Seb)*100%,

where Ррп – profitability of products sold,

Pr – the amount of profit of the enterprise,

Seb – production cost.

Types of product profitability

The formula for product profitability on the balance sheet determines the coefficient reflecting the part of the profit that relates to each earned ruble of goods sold. The value determined by this formula may be different for enterprises in different industries, with different assortments and competitive strategies.

There are several types of product profitability, among which the most often calculated are:

• Profitability in accordance with gross profit shows the percentage of gross profit that is in each ruble of goods sold;
• Operating profitability shows the share of profit attributable to each ruble that is received from revenue after paying all tax payments and interest;
• Net return on sales reflects the share of net profit attributable to each ruble earned.

The formula for product profitability on balance makes it possible to improve the pricing policy of any enterprise, as well as find ways to effectively reduce its costs, which relate to commercial activities.

Formula for product profitability on the balance sheet (by profit)

When selling products, calculating profitability, economists use various types of profit. There are several options for the formula for profitability of products on the balance sheet.

Let's look at the most common product profitability formulas:

• Profitability in accordance with gross profit is calculated by the ratio of gross profit to revenue (in percent):

P(by VP)=(Pval/Vyr)*100%

• Operating profitability is determined by the ratio of profit (before all tax payments are made) to revenue (as a percentage):

P(by OP)=(Pop/Ext)*100%

• Profitability in accordance with net profit is calculated by the ratio of net profit to revenue:

R(according to emergency)=(Ir/Vyr)*100%

The value of product profitability

The profitability of products sold by an enterprise is most often called the rate of profitability, since it reflects the share of profit in the amount of revenue.

The formula for product profitability on the balance sheet characterizes the state of decreasing profitability of sales and a simultaneous decrease in the competitiveness of the product, and a drop in demand for it. When profitability decreases, enterprise management must take measures that will stimulate demand and increase the quality of products sold.

If there is a tendency for changes in product profitability over a period of time, then economists distinguish a base and reporting period. The basic indicators can be considered the indicators of previous years (one year). These indicators are required to compare the profitability indicator for the reporting period with the coefficient that is taken as the basis.

DEFINITION

Profitability of products sold is determined for a selected period of time, and the unit of measurement for the indicator is percentage.

There is a general formula for product profitability (sales):

Ррп=(П/В)*100%,

where Рп – product profitability,

P – company profit,

B – the amount of revenue for the sale of products.

Profitability of products sold at cost

In addition to the revenue indicator, the profitability of products sold can be calculated at cost:

Ррп=(П/С)*100%,

where Ррп – profitability of products sold,

P – company profit,

C – cost.

What does the profitability of products sold show?

When calculating using the formula for the profitability of products sold, a coefficient is determined that shows the part of the profit that will accrue to each 1 ruble of products sold. The value, which is determined by the formula for the profitability of products sold, will be different for companies in different industries, product ranges and competitive strategies.

The most common types of profitability of products sold are:

• Gross profit margin, showing the number of percent of gross profit found in each ruble of products sold;
• Operating profitability, showing the share of profit that falls on each ruble received from revenue after paying taxes and interest;
• Net return on sales, which reflects the share of net profit that relates to each ruble earned.

Determining the profitability of sold products provides opportunities for improving the pricing policy of any company, including costs related to commercial activities.

Types of profitability of products sold

When calculating the profitability of products sold, economists use the appropriate types of profit. For this reason, we can distinguish various options for the formula for the profitability of products sold.

Let's define the common types of profitability of sales (sales) of products:

• Profitability of sales based on gross profit, calculated by dividing gross profit by revenue as a percentage:

Rrp(by VP)=(Pval/V)*100%

• Operating profitability, calculated by dividing profit (before all taxes) by revenue as a percentage:

Rpp(by OP)=(Pop/B)*100%

• Profitability of product sales based on net profit, which is calculated by dividing net profit by revenue as a percentage:

Ррп(according to emergency)=(Пч/В)*100%

The value of profitability of products sold

The profitability of products sold is often called the rate of profitability, since it shows the share of profit in the amount of revenue.

The formula for the profitability of products sold shows that if the profitability of sales decreases, then there is a decrease in the competitiveness of the product and a drop in demand for it. In this case, the management of the enterprise must implement measures to stimulate demand, maximize the quality of the goods sold, or begin to conquer a new market niche.

When identifying trends in changes in the profitability of products sold over time, a reporting and base period are distinguished. Basic indicators are the indicators of past years (1 year), mainly those in which the company received maximum profit. Indicators of the base period are necessary when comparing the profitability indicator of products sold for the reporting period with the coefficient taken as the basis.

Examples of problem solving

EXAMPLE 1

EXAMPLE 2

The basis for the profitability of product production, in general, is the efficiency of production and sales of its products. Regardless of the company's field of activity, profitability is determined by the ratio of the profit received from the sale of the final product to the costs of its production. The formula will help calculate the current state of the company.

How to calculate?

Tracking the current state of an enterprise and monitoring the profitability of its activities is a common practice throughout the world.

For successful business development, it is not enough just to have an intuitive understanding that a project will bring profit; it is also necessary to conduct a mathematical analysis of the objective state of the market, calculating the return on the implementation of the project (product) and its payback period.

The current level of product profitability is calculated based on real data, which is reflected every month in the accounting documentation of the enterprise, as well as quarterly reports.

Calculating profitability is of interest to a wide range of people:

• business owners who evaluate the correctness of the “laid course”;
• creditors who monitor the economic situation of the enterprise.

The profitability of the enterprise is considered as an absolute value, thus it is easy to represent it in the form of cash (in the accounting report).

When using relative profitability indicators (ratios of absolute values ​​that are expressed as a percentage of each other), it is necessary to give some explanations. Relative indicators are not so demonstrative.

The product profitability ratio (in its general form) demonstrates how many units of profit a businessman will receive from a unit of production costs.

The profitability ratio is written as a fraction, where the numerator is the profit earned in the process of selling the product, and the denominator is the total costs related to both commercial promotion and the technological production cycle.

The calculated coefficient must be multiplied by 100. Thus, the proportion shows the ratio of profit to total cost (full production costs).

It is important to understand that a single calculation of product profitability cannot reflect the real state of the enterprise. When conducting a comprehensive analysis, the following points should be taken into account:

• the difference between the actual and planned profitability of products sold;
• comparison of the data obtained during profitability calculations with competing firms for similar products;
• analysis of the company's product ratings over the past few years.

There are two main concepts in searching for the profitability of an enterprise's products.

Very often, profitability is calculated only for a unit of a product, then the costs of its production and the profit received from sales from the general structure are separated.

This concept is used primarily by analysts to make forecasts. The second concept for calculating profitability is to analyze the global situation. A study of the total amounts for the reporting period is carried out.

The profitability of goods production is always considered as a percentage. This makes it possible to simplify the further use of calculated indicators for conducting a comprehensive analysis of the enterprise in the long term.

Profitability of products sold (ROM - from English Return on Margin) is an indicator that shows the efficiency of product sales in the form of the ratio between income and costs for the production of goods and their sale.

It is quite possible to open a business with minimal investment. Here you will find information about proven ideas for men and women. Profitability in practice.

Formula for profitability of products sold

In order to calculate the profitability indicator from the sale of a particular product, sales profit or net income received is used.

Two different types of cost can also be used - total cost (including selling costs) and production cost (production costs).

When calculating product profitability, the following formulas are used:

1. Profitability in terms of total sales profit and total cost = PR/TS*100%, where PR is the total profit; TC – total production costs;
2. Profitability based on profit from sales and cost of direct (production) costs = PR/TS prod. , where PR is the total profit; TS manufactured – total production costs;
3. Product profitability based on net profit and total cost of production cost = PE/TC, where PE is net profit (total profit minus taxes and other payments); TC – total production costs;
4. Product profitability, which was calculated based on net profit and cost of production of goods = PE/TC prod. , where PE is net profit; TS manufactured – total production costs.

Profit from sales is taken from the income statement (value on line 050). Profit can also be calculated using the following formula: PR=TR-TS, where PR is profit from sales; TR – sales revenue; TC – production cost (full). Revenue can be viewed in the income statement in line 010. The full cost can be easily calculated using the proposed formula: TC = line 020 + line 030 + line 040, where line 020, 030 and 040 are respectively the costs of production, commerce and administration.

Net profit (NP), as a rule, is taken from the income statement (line value 190).

Other expenses and income are those costs that are not directly related to production costs.

Product profitability, as mentioned earlier, can be calculated both for an individual product item and for an entire group of products.

Product profitability is traditionally calculated as a percentage. The information obtained during the calculations is not of immediate interest, however, it is used to draw up an enterprise strategy for the near future.

When calculating product profitability, you should not lose sight of some important details, namely:

• Factors influencing the forecast of enterprise profitability (dictation of sales figures).
• The cost of goods does not always decrease. Especially when it comes to knowledge-intensive areas where modernization is necessary. Replacing equipment at the initial stage will cost a pretty penny.
• Preference (if the list of goods is heterogeneous) must be given to those whose profitability is the highest.

Standard product profitability is usually calculated over time, using sampling over several months or years.

As a result, information users receive an illustrated picture of the effectiveness of management at the enterprise.

The formula for calculating product profitability shows a reliable result, however, the correctness of the calculations is largely influenced by the tax system that operates in the country.

Calculation examples

To understand the process of calculating the profitability indicator, let's look at a few simple real-life examples.

Let’s say the total revenue received from the sale of goods from an enterprise producing baby diapers over the past month amounted to 500 million rubles. The cost of production of sold products (including costs of commerce and administrative personnel) is 265 million rubles. Determine the profitability of the products that the enterprise produces.

First, let's find the profit from the sale of goods for the past month.

To do this, we subtract the full cost from the total revenue: 500-265 = 235 million rubles.

We will find the profitability of products using the calculation formula: PR/TS*100, where PR is the profit from sales, TS is the total cost of production costs.

Let's substitute the values: 235/265*100%=88.68%. Profitability of product sales shows how much profit the company receives from each ruble of products sold. In our case, the profit is 88.68 kopecks. This is a fairly high profitability of the product. By analyzing the product profitability indicator, you can assess the competitiveness of a company in the market to promote new products. If the profitability of a product falls, this indicates a decrease in demand for the company's products or low production efficiency at the plant.

The profitability indicator can also be calculated for several products that form a specific product group at the same time.

Let's look at the second example.

The company produces three types of products with an average profitability of 26%. Sales revenue and cost for each product are presented in Table 1. It is necessary to find the profitability for each product and give recommendations to the company regarding the further production of products.

To calculate the profitability of products, we will use the formula from the first example.

Profitability of commercial products. Formula: “A” = 9/27*100%=33.3%;

Profitability of product “B” = 8/22*100%=36.36%;

Profitability of product “B” = -1.89%.

If we analyze the absolute value, then product “A” brings more profit than “B”. However, in reality, “B” is 3 kopecks more profitable (3.06%). Thus, the company needs to focus on producing product “B”. Regarding product “B”, it should be said that this product is unprofitable, i.e. brings a loss. Accordingly, the production of product “B” must be stopped immediately. The loss for each ruble of costs is 1.89 kopecks.

Video on the topic

Every aspiring entrepreneur is incredibly happy when he receives the first shoots of his work, and this is quite fair. - a difficult path that requires great expenses in every sense of the word. Why do some of them suffer subsequent disappointment? After all, the idea is great, the products are in demand, the equipment is set up, and the staff has already learned how to work? The problem is that production costs constantly exceeded sales profits, and the initial capital melted like an iceberg in Africa.

The main result of the activity of any enterprise was and remains. Achieving this indicator depends on many factors:

1. Income from sales of manufactured products (or services of the enterprise).
2. Production costs: utility bills, payments and interest on loans, tax obligations, materials and equipment, payments to employees and subcontractors, etc.

The profitability of an enterprise allows you to evaluate the effectiveness of its activities and consists of the total result of profitability:

• Sales (product sales), if the organization produces goods in an assortment, then it is necessary to calculate the profitability for each type of product.
• , here we mean all the company’s property (transport, real estate, equipment, etc.) without taking into account borrowed funds and debt obligations.
• Own capital.
• Investments and loans.

In addition to the production and sale of products, a company may be engaged in any other work: providing services, investing, or being a borrower. Any of these operations will generate revenue or increase costs, which in turn affect the profitability of the organization. Therefore, it is very important to evaluate each of these components separately, which will allow you to identify weaknesses and correct the situation in a timely manner.

Sales profitability depends on many factors:

• commodity unit, production costs
• Buyer activity and demand for products
• Competitiveness, quality and attractiveness of the product for the consumer
• Pricing policy and market value of a commodity unit

This value is calculated as a percentage and shows how much profit the organization received over a certain period of time from each ruble spent on the production and sale of a particular product. Also, this financial indicator is an assessment of the effective management of the enterprise, because making a profit directly depends on the right decisions of management.

Calculation formula and main indicators

So, in the process of its activities, an enterprise expends resources, and as a result makes a profit. The ratio of profits to costs is the profitability ratio of the enterprise. As for the profitability of products sold (sales), it is determined by the following formula:

Where RRP is the return on sales ratio, PP is the profit from sales, SBS is the cost of goods sold.

The correctness and accuracy of the calculations lies in what types of profit and costs are included in them. It is also necessary to clearly define the period for which the calculation will be made. If profits are calculated for one month and costs for another, then the result obtained will be incorrect and useless.

It will not be entirely correct to use the net profit of an enterprise in calculations if the company receives income from several types of activities, and not each of them is related to the sale of products. In this case, you need to take as a basis only profit from sales, which is easy to find in. If you need to determine the profitability ratio of sales of a certain product group or type, you will have to calculate sales revenue for the selected period of time specifically for a specific product category.

Now you need to decide on the cost. This indicator has two main forms: production and complete.

Production costs consist only of the costs of manufacturing products (raw materials, materials and other resources), but do not include sales costs. Operating with this figure is also not entirely correct, since the result obtained will be overestimated and not relevant enough. The calculations should be based on the full cost, which consists of the costs of both production and sales.

The accuracy and reliability of the result will depend on the choice of the correct main indicators, without which the analysis and further calculations lose their meaning.

Calculation examples and conclusions

For a more complete perception of this information, you should consider a visual one: the company produces chocolate and candies. Sales revenue for the selected period amounted to 560,000 rubles, the total cost, including all expenses, was 243,000 rubles. It is necessary to calculate the profitability of products sold.

First, you should determine the profit from sales; to do this, you should subtract costs from revenue: 560,000-243,000 = 317,000 rubles. Next, we calculate the return on sales ratio: 317000/243000 = 1.3045, round the result to hundredths, it turns out 1.30.

To determine the amount of profit from each ruble for products sold, this is multiplied by 100, 1.3*100=130 (kopecks). It turns out that every ruble spent brings 1 ruble 30 kopecks to the company’s profit. This can be considered a very good result.

Now an example of a more detailed calculation. The company produces chocolate bars, boxed and weighed chocolates.

Profitability for each product group for each ruble spent, respectively: 0.86 rubles, -0.34 rubles, 0.78 rubles. It turns out that the production of boxed sweets is unprofitable for the enterprise and should either be stopped or revised: increase the market value, reduce costs, etc. Sometimes the company's management decides to carry out promotions, that is, costs increase for a certain time, but subsequently there is a positive trend.

The profitability threshold is considered to be zero, when costs are covered, but the enterprise does not make a profit. This trend is typical for new firms whose products are not yet in high demand, investments have not yet paid off and there is a constant need for advertising costs. If this indicator remains zero or negative for a long time, the situation should be analyzed and weaknesses identified.

Sales profitability analysis

There is no regulatory framework for the profitability ratio of products sold. This financial indicator is determined by comparison:

• With sales of competing companies
• With previous indicators and dynamics in general
• Compliance with previously drawn up forecasts and plans

Competitiveness has always been the key to a successful business. It is almost impossible to achieve good results in the modern market without looking at competitors. For this purpose, regular monitoring of certain product groups is carried out. Basic methods of maintaining competitiveness:

• Flexible pricing policy. An exorbitantly inflated price leads to a decrease in consumer demand, and an understated price will not bring profit. It is very important to find a middle ground here in order to stay afloat among competitors.
• Constant control of product quality. Without paying attention to this issue, you can lose all your clients and customers.
• The attractiveness of the product for the buyer. All means are good here: colorful practical packaging, high-quality advertising, etc. Many companies provide retail outlets with equipment for their products in order to present them in the most favorable light to the consumer.

A rather unstable financial indicator that needs to be constantly monitored. The easiest way to analyze the situation is using graphs or a table where data is entered for each reporting period; this will allow you to quickly and clearly track the dynamics of profitability.

If this financial indicator is prone to decline and does not correspond to pre-developed plans, it is necessary to identify the reasons for this trend and take measures to eliminate them. The methods can be very diverse, but they have two main directions: reduce costs and increase profits.

Profitability of products sold is the main indicator that evaluates the company's activities. This aspect is important both for the owner of the enterprise and for investors, creditors and business partners, so it must be monitored constantly and very carefully.

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