Instruction

1

Calculate an initial sale price by the formula:

TSR = (S + P +A)+ VAT

Where

TSR – selling price

– Unit cost of products/goods

P – planned /desired level of profit (profitability)

A – the excise duty (if any)

VAT – added tax stoiomst

Decide on the level of income and profits you wish to obtain over the planning period. Make sure sales can provide you this level.

TSR = (S + P +A)+ VAT

Where

TSR – selling price

– Unit cost of products/goods

P – planned /desired level of profit (profitability)

A – the excise duty (if any)

VAT – added tax stoiomst

Decide on the level of income and profits you wish to obtain over the planning period. Make sure sales can provide you this level.

2

Determine the break-even point, i.e. the volume of sales at which there is neither loss nor profit. This is necessary in order to understand, below what level of implementation you can't fall. The break-even point = Total fixed costs/(price - variable costs per unit of output).

3

Get to know the market. Find out the volume of product sales your group. Find out the prices for similar goods, works and services from your competitors. Find out what products are substitutes for the product that you produce. Conduct market research of the expectations of customers.

4

Compare the original (desired) selling price which you have by calculating with the prices of your competitors or with the level of expectations of customers.

5

Adjust the initial sale price. Develop and install system of discounts. Set different prices for different sales volumes. Build a graphical model. For this purpose, according to the x-axis show price on the y-axis is the sales volumes. Build curves of supply and demand, on the basis of previously collected data for marketing research (demand curve) and their own expectations (the supply curve). Thus, you learn the optimum sales price for your market.

Useful advice

If the cost per unit of output at your enterprise is structured into fixed and variable costs you can calculate the price of realization on the level of variable costs. This may be necessary if aggressive policy of entering the market, with the market introduction of new products. In this case you neglect fixed costs, it does not affect the final result, i.e. not relevant.

# Advice 2: How to calculate market size

The volume

**of the market**is the indicator telling you how much goods or services consumed in a geographical area per unit time. The concept of "volume"**of the market**is often confused with its "capacity", the difference being that the capacity is evidence of effective demand, the volume of really sold products or services.Instruction

1

First you need to define the geographic area described by the market (or segment) and sources of information – as a rule, the results of surveys, studies, expert opinions, statistics etc. Determine the period of time that will be (usually the month, quarter or year) and the units in which you will measure the volume

**of the market**. Can be in pieces or litres (when it comes to certain groups of goods), but rather in monetary units.2

Evaluate possible sources of information and collect in sufficient for your needs, the amount of opinions of experts, statistics, survey data. You need to find the most accurate and, most importantly, check the data. In some cases, will have to do analytical work, comparing the disparate pieces of information and bringing all data into a common format (say, in rubles). There may be a number of difficulties, for example, the amount

**of market**goods in General easier to calculate than**market**services. Also much easier to estimate the amount**of the market**or a sector in General, the volume**of the market**of a single product or (especially) services; in this case, most likely you will have to resort to methods of indirect assessment.3

The resulting "raw" data you need to present several important indicators. The first is the total volume

**of the market**in a given time interval, the dynamics of its changes in two or three preceding time interval and the forecast or trend the next. The second is the distribution of the total volume between territories, as a rule, show the share of large cities in the total volume), their dynamics and trends. The third indicator is the volume distribution**of the market**between the leading players (and therefore how varied their share in the past, what is the prognosis). The fourth – largest selling products or product groups and their share, respectively, the dynamics and prognosis. And finally, the fifth indicator (it is not necessary, because it requires a separate study, but very significant) – the ratio in the total volume**of the market**and its capacity.# Advice 3: How to calculate the level of profitability

Indicators

**of profitability**is one of the main places in the analysis of financial and economic activities of the enterprise. Profitability imply the use of a medium enterprise, where it not only covers their costs but makes a profit.Instruction

1

In the analysis

**of profitability of**enterprises consider several indicators. Return on assets is the profit received by the organization to the average value of assets in percentage terms. This measure shows how much profit is obtained on each ruble advanced in production assets.2

ROI, or return on invested capital, to determine the effectiveness of the use of funds invested in the development of the firm. This indicator is calculated as the difference between the ratio of profit before taxation to balance sheet total (in percentage terms) and the amount of short-term liabilities.

3

Most often in the analysis of activity of the enterprise used indicator

**of profitability**of production. It is defined as the ratio of the profit of the organization, remaining at its disposal, and total cost of goods sold. Profitability of products shows how many cents of profit the company will receive for each ruble of investment costs. This indicator can be calculated as for the organization as a whole and in its units, as well as individual products. This coefficient depends on changes in the structure of sales, its cost and the level of sales prices.4

Another popular measure

**of profitability**is return on sales. It is calculated as the ratio of profit from sales the proceeds from its sale. Another of his name – norm of profitability. Profit margin shows what proportion of profit in total revenue. If at the enterprise the indicator in the dynamics is reduced, then it indicates a decrease in demand for its products and reduced competitiveness in the market.