You will need
- Calculator, Notepad and pen, accounting records for the activities of the organization
Define the measure of profitability (efficiency) of production activities. Otherwise this figure is called balance profitability:Profitability = balance sheet total net profit / (Average value of current assets + average fixed assets) * 100%.According to this formula, the rate will be slightly overestimated as in the balance sheet reflects the profit from all activities of the organization and not just from the manufacturing process. So are considered indicators of profitability of total assets and an indicator of profitability of own capital.
Calculate an indicator of profitability of total assets. This parameter shows the efficiency of use of personal property of the organization and is calculated according to a formula:Return = (Balance sheet profit / balance sheet assets Amount)*100%.
Calculate an indicator of profitability of own capital. This parameter is an indicator of the efficiency of use of invested in the organization of capital and is calculated by a special formula:Profitability = (Net profit / equity capital) * 100%.This indicator, as a rule, interests of shareholders and investors.
Calculate the profitability of products. In order to calculate the profitability of products as a performance indicator of the cost of sale or production, you must use the following formula:Profitability = (Profit from sales / total cost of products) * 100%.
Calculate the return on sales. Profit margin is an indicator which characterizes the efficiency of cost of sales. For its calculation we use the formula: Profitability = (Profit from sales (sales) / Cost of products sold) * 100%.
The correct calculation of the profitability indicators show the company detailed analysis of the competitiveness of its products in the market, and will also give a boost to increase volume sales and adjustments to the production process.