How to determine profitability

Even if you have no economic education, without the ability to determine the profitability of a business, you are unlikely to be able to do. Profitability is a clear indicator of the meaning of carrying out any commercial activity. Observing changes in profitability over time, we can make competent management decisions relating to all areas of the organization: from cost reduction and pricing to assortment policy and create its own sales network.

Instruction

1. Types of profitability there are many. But most often the case when it is necessary to determine profitability, mean return on sales or the profitability of products. In order to clearly produce the necessary calculations, we will use a simple example.
   Let's say you purchased a consignment of 80 000 rubles. Sold this for 120 000 rubles. Thus, a profit of 40 000 RUB.
2. To determine the profitability of sales, you need to divide the profit from the sale revenue from the sales and multiply the result by 100 percent since profitability usually considered in percentage terms.
   40 000 / 120 000 * 100 = 33,(3) %
   The return on sales thus shows the share of profits in revenue, and in our example it is 33%.
3. In order to determine the profitability of products, is the opposite. You need to divide the profit from the sale of the cost of purchasing quantities of goods and, again, multiplied by 100 percent.
   40 000 / 80 000 * 100 = 50 %
   Product profitability shows how much profit falls on each unit of product sold.