The effectiveness of the economic activity of any entity in many respects depends on how it analyzes the use of profit. This activity is carried out not on the basis of subjective assessment data, but on the normative basis of tax legislation, available instructions and recommendations developed by departments for a specific industry and type of enterprise.
The statistical basis for the analysis is accounting information on capital flows, the use of profits and the amount of losses, and others. The process, which involves the analysis of the use of profit, includes the study of the determining factors affecting changes in taxable profit, the amount of dividends paid, as well as the amount of interest and tax deductions.
As a rule, tax institutions are interested in taxable profit, because the amount of tax and net income depends on these indicators, in the first place . The change in this parameter, as a rule, is influenced by factors that take part in the formation of profit.
As the analysis of the use of enterprise profits provides, net profit is an important indicator of the final results of its activities. Mathematically, it is calculated as a simple difference calculated between a certain amount of profit and the amount consisting of such terms as taxes on profit, economic sanctions and other payments that are covered by profit. This value is determined by the factors of the dynamics of total profit, as well as those factors that affect the specific value of net profit, determined in relation to total profit. For example, in order to find out how the amount of net profit changes, multiply the profit change that occurs due to each individual factor by the specific weight.
For all calculations, it should be borne in mind that net profit can only be used in such a way as provided for in the constituent document of the enterprise. And therefore, its use is regulated and can only be directed to:
- investment in economic development;
- creation of reserve development funds ;
- payment of dividends;
- the formation of insurance funds.
It is very important that the analysis of the use of profit takes into account the proportionality of the distribution of capitalized and consumed values, because this allows the company to determine and adequately establish:
- the amount of investment for the development of a manufacturing enterprise;
- rate of return to the owners of the enterprise.
In this analysis, it is appropriate to remember that the factors that determine the adequacy of the proportionality under consideration are: legal restrictions, tax preferences and benefits, profit margins and the amount of external investment. These factors are usually attributed to external. Internal include: level of profitability, availability of profitable investment projects; leverage, the presence or absence of domestic investment sources, the level of real solvency. It is important that the analysis takes into account the need for the company to accelerate the completion of already ongoing projects, as their additional and unforeseen financing can significantly affect profit utilization.
For example, such an indicator is the efficiency of use of fixed assets of the enterprise. To assess it, it is important to show how it is analyzed and how much the main items of profit use fluctuate. To optimize these parameters, you should either change the established norms of net profit or change the value of the share of this article of its use.
In a word, knowing the exact indicators of net profit and its dynamics, the analyst has every opportunity to accurately determine the degree of their influence on the magnitude and parameters of changes in consumed and capitalized profit.