To assess the comparative effectiveness of individual industries and enterprises that produce various types of products in different volumes, profitability indicators are used. These indicators show the ratio of profit to resources spent on production. Of all the indicators, the most commonly used are indicators of product profitability and production profitability.
Profitability or profitability of an enterprise is usually assessed using both absolute and relative indicators. Moreover, absolute indicators usually reflect profit, which is measured in value terms. If we consider the relative indicators of profitability, they are measured in percent or are reflected in the form of coefficients. Profitability indicators to a lesser extent than the amount of profit depend on inflation, as they are relative values associated with the profit and costs of the enterprise.
The most important of these indicators is the return on assets , which is also called the return on property. To determine it, the profit remaining at the disposal of the enterprise must be divided by the average value of the assets of the enterprise. This indicator characterizes the profit that the company receives from each ruble attributed to the cost of forming its assets. It expresses the measure of profitability of the entire enterprise in a particular period. It takes into account not only the amount of profit, but also the change in the value of fixed assets, current and non-current assets. In general, this important indicator includes indicators of profitability of fixed assets and current assets.
Considering other types and indicators of profitability, it is necessary to note such an important indicator as return on investment . With its help, the effectiveness of the use of those funds that are sent to the development of this enterprise is determined.
The next important indicator for economic analysis is the profitability of products . To determine it, the remaining profit at the disposal of the enterprise is divided by the full amount of the cost of sales. Also, for calculation, not all the total profit can be used, but only the profit received from the sale of products. The value of this indicator reflects the amount of profit that the company has from each ruble invested in production and spent on product sales. It can be calculated both for the entire enterprise, and for individual divisions of the enterprise and for certain types of products. In some cases, the ratio of the profit remaining at the disposal of the enterprise to the total amount of revenue received from the sale of products is used to calculate this indicator.
The last important factor characterizing profitability indicators is the profitability of sales . To calculate this indicator, it is necessary to divide the profit received from the sale of products into the total revenue from the sale of products. With its help it is determined what proportion makes up the profit as part of all revenue from the sale of enterprise products. This indicator is also called the rate of return. When considering it, it can be seen that when the profitability of sales begins to decline, then this factor indicates a lack of competitiveness of products on the market, therefore, the demand for products decreases. To increase the level of sales profitability, you need to focus on changing market conditions, monitor changes in product prices, constantly monitor the level of production costs, costs of product sales and implement a flexible policy in the field of assortment of output and sales of products.