In economics, for a qualitative assessment of the use of fixed assets of the production process, it is customary to use a certain system of indicators. Profitability is one of its elements and is generalizing. What does fund profitability show ? How to calculate this indicator? What is its normative value?
The essence of the concept
Fund profitability should be understood as a coefficient that is equivalent to such a ratio as book profit to the total book value of production assets, calculated as the average value for the year. It is important to note that the information for the calculation in this case is in the balance sheet. Thus, the return on assets shows the size of the profitable item, which is correlated with the unit cost of fixed assets related to a particular enterprise. This indicator fully characterizes the share of profit, reflected in the balance sheet, to the value of non-current assets recorded for the annual period.
Naturally, it is advisable to define the ratio under consideration as an indicator of the profitability group, calculated by means of the balance sheet and used for a detailed analysis of the effectiveness of the use of production process funds by the company or business. These include non-residential and residential buildings, various structures, vehicles, tools for productive production, machine tools, computer equipment and so on.
Profitability calculation
As it turned out, profitability shows effectiveness in the process of managing fixed assets of the production process of the enterprise. How to calculate this indicator? It is important to note that in the process of calculating the coefficient, it is advisable to use one of two formulas. The first is a general model, while the second is related to the balance sheet. In addition, the calculation below is presented both according to the information of the new model of the balance sheet, and according to the old.
So, since the profitability shows the number of rubles received per ruble of the main production assets, it is advisable to present this indicator as the ratio of net profit (otherwise called accounting) to the value of the main production funds calculated for the annual period:
- K (f) = approx. before tax / cf. cost out of turn. assets * 100%.
The calculation of the coefficient in accordance with the old balance sheet looks like this:
- Kf = p. 140 / 0.5 * (p. 190 ng + p. 190 kg) * 100%.
And the formula corresponding to the new balance sheet is displayed as follows:
Kf = p. 2400 Form 2 / (p. 1100 ng. F. 1 + p. 1100 kg. F. 1) / 2 * 1 -%.
Profitability analysis
In accordance with the data of the previous chapters, it can be determined that the return on assets shows profit per unit cost of the fixed assets of the production process. The higher the value of the coefficient, the greater the efficiency and effectiveness indicators of the application of the production funds of a particular enterprise. It should be noted that often even a decrease in the coefficient under consideration is positive. Why is that? The fact is that such a picture can easily arise when an enterprise makes investments of an additional nature, serving as costs and aimed at the innovation process, technology development, as well as expanding the range of products.
What else?
It is important to add that the analysis of the coefficient should be dynamic, because it allows you to fully assess the trend of management in relation to fixed assets. The increase in the indicator leads to a significant increase in the level of financial stability and investment attractiveness of the company.
Above it was proved that the profitability shows the profitability of the enterprise. From this it follows that the coefficient cannot have a generally accepted normative assessment. Thus, the optimal value of the indicator, as a rule, depends directly on the type of activity of the company and its industry affiliation (in the capital-intensive sectors, the coefficient will be significantly lower than in trade).