The goal of any business is to obtain a result, in this case, in the form of profit. You need to know how it is calculated in order to determine the profit from the sale of products. Formally, it is calculated as follows: cost of sales, business expenses and management expenses are taken away from sales proceeds.
The company sells products, receives revenue, and to identify financial results compares the revenue with the funds spent on production, as well as the sale of products produced by the company (services provided or work performed). In the economic literature, two approaches to the determination of costs (costs) are considered:
- economic;
- accounting.
And profit is considered based on these two aspects.
Economic profit is understood as revenue minus total economic costs, which are explicit and implicit. It represents a fee for uncertainty and risk and is the result of innovation, as well as the initiative of the entrepreneur.
Revenue minus accounting costs that are explicit is accounting profit.
Types of profit and its functions.
Each enterprise has three indicators:
- Balance sheet profit;
- Profit that is taxed;
- Profit is net.
Carrying profit is an important indicator that demonstrates the financial condition of an enterprise. Includes three elements:
- Profit from the sale of products, which in the balance sheet has the largest share;
- Profit from the sale of fixed assets, other property;
- Profit received from non-operating operations, taking into account losses, considered as financial results.
Net profit is distributed to the following funds: consumption, accumulation, reserve.
Profit generation can be presented in the following sequence:
- Revenue from sales of products;
- Cost of production;
- Profit from the sale of products;
- Profit from the sale of fixed assets of the enterprise, other operations;
- Non-operating income ;
- Balance sheet profit;
- Profit adjustment;
- Taxable income ;
- Income tax;
- Net profit from product sales.
Profit performs the following functions:
- clearly demonstrates what economic effect is obtained as a result of economic activity;
- is the main element in the formation of financial (monetary) resources of the enterprise;
- thanks to profit, budgets of different levels are formed.
Ways to increase profits.
Its increase is possible as follows:
- technical methods of increase, which are based on improving production technology, installing modern equipment, and, as a result, improving the quality and quantity of products manufactured by the enterprise, respectively, should increase the volume of sales;
- organizational ways, which are to improve the organization of production, labor organization and management;
- economic leverage to increase profits is as follows: material incentives for staff for a creative approach to work, ensuring the growth of the enterprise, the growth of its business activity; the formation of a competitive environment that promotes profit growth through the search and use of reserves, and the production of competitive products; company incentives through regulatory documents.
More fully, the final economic results analyze profitability indicators. They show whether the enterprise works effectively and how efficiently, whether various lines of business are profitable. Using these indicators, an analysis is made of the volume of sales of products, assessments of the enterprise as a whole, and also, as an instrument of investment policy and pricing. The value of profitability indicators clearly demonstrates the correlation of the effect with available and used resources.