The effect of the activities of the enterprise in absolute terms is expressed in the amount of profit or loss. However, the use of absolute values ​​for analysis is not very convenient, therefore, they often resort to the calculation of relative indicators. From the standpoint of efficiency, the most popular indicators are profitability indicators. In more detail I would like to dwell on those of them that characterize the return on assets of the enterprise. The particular importance of this group of indicators is that all the activities of the enterprise are mainly associated with interaction with property, which is represented in assets. Thus, determining the degree of effectiveness of this interaction is extremely important.
The calculation of the profitability indicator is carried out by the ratio of profit to the sum of the profitability of which is determined, in this case, assets. As for profit, here everything is not so clear. There are a lot of different indicators that can be used in the calculations. Most often, the return on assets is calculated on net profit, profit before tax or on profit from sales. The return on assets determined by the amount of net profit shows how much of this profit falls on each unit of the value of the organization’s property. Net profit is influenced by many factors, therefore, it will not always be correct to use it in the calculations if it is intended to compare among themselves the indicators of various enterprises. The use of profit before tax will help to get rid of the influence of features in taxation, and only the effectiveness of the main activity can be taken into account by calculating the profit from sales.
As mentioned above, return on assets shows the degree to which a firm uses its property efficiently. It is clear that this property is heterogeneous, and it is customary to classify it. In this regard, it will not be out of place to determine the profitability of separately current and non-current assets of the company. The calculated coefficients will characterize the efficiency of use of each of these parts separately.
It is necessary to pay attention to the fact that the principles of accounting for profit and asset indicators are slightly different. The profit presented in the statements reflects the amount accumulated over the period, and the assets reflect the value at a specific date. In order to smooth out these differences somewhat and take into account possible changes in the value of assets, it is customary to use their average value for the period in the calculations.
Return on assets shows the level of efficiency in itself, but to draw any conclusions from a single indicator is simply impossible. It is necessary to have a number of indicators in order to compare them with each other. Most often resort to the use of comparisons in time, which are to study the dynamics of indicators. For this, relative and absolute changes are determined, which makes it possible to judge the presence of any tendency. In addition, they often use comparisons with the profitability levels of other similar enterprises or with the profitability characteristic of the industry as a whole. Another popular method of analysis is the factor method, which is carried out according to long-developed traditional methods and allows you to evaluate the impact of certain factors.
As you can see, determining the efficiency of using property is a very important aspect of studying the activities of an enterprise. The return on assets shows, depending on the indicators used, both the profitability of the core business and the functioning of the enterprise in general. However, it should be remembered that a simple calculation is not enough, and it is necessary to analyze the results.