Ways to increase the profitability of a company. Enterprise income - what is it? Types of enterprise income Profitability of the organization
Structure of enterprise income.
Absolute indicators of enterprise profitability.
Relative indicators of enterprise profitability and their relationship.
1. In market conditions, in order to make management decisions, you need to know not only the amount of profit received by the enterprise, but also their profitability. Profitability characterizes the efficiency of the enterprise and the skill of investment management. The main parts of profitability are profit, but the profit that is given in the calculations is a rather conditional value. In practice, it is carried out: in accordance with a number of documents, in accordance with the regulatory documents used by the State Tax Service.
The concept of income is more capacious than profit. In the explanatory dictionary, “income” is the flow of cash. Income- These are funds that come to the disposal of the enterprise in various forms. In modern economic conditions, along with profit, an enterprise can receive other income (dividends, interest on deposits, etc.).
Therefore, the final result from financial and economic activities would be correctly called not balance sheet profit, but income on the balance sheet.
The company has at its disposal temporarily free funds that are of a targeted nature, which are regularly received on the account. Such amounts of funds can only be used after a certain period of time. These are depreciation deductions, deductions to any reserve funds, for the creation of other funds provided for by law. When a reserve or other fund is created on the balance sheet, the profit itself decreases. These deductions are not included in the profit, but they remain at the disposal of the enterprise.
To determine the amount of funds of an enterprise, it is necessary to determine:
net profit amount
amount of depreciation charges
the amount of accrued reserve funds from profits.
They characterize the profitability of the enterprise for the reporting period.
2. When determining the degree of return on invested capital, a whole system of interrelated indicators is used. Each of these indicators has its own meaning for reporting users and has its own economic interpretation. When analyzing profitability, several calculation methods can be used, but most often they are calculated as a ratio of some type of income and some kind of comparison base.
Indicators(numerator):
Profit or income from the main activities of the enterprise, i.e. profit from the sale of products, services, type of work. This is the financial result of the enterprise for which the enterprise was created.
Profit or loss from financing activities.
This is the balance between income and loss on operations not related to the sale of products, taking into account interest for using a bank loan.
Income from investment activities. This is part of the profit from financial and economic activities, which is the amount of income from any financial investments in shares of other enterprises, shares, bonds.
Book income or book profit. This is the amount of income from the financial and production activities of the enterprise.
Net profit. This is part of the balance sheet profit minus contributions to the reserve and other similar funds, minus the amount of profitable payments, minus income tax.
Profit is at the complete disposal of the enterprise. This is an absolute indicator, equal to income after completion of all distribution operations, differs from net profit by the amount of accrued dividends on shares.
Net result of investment exploitation. This is the economic effect received by the enterprise from the use of invested capital = the amount of book profit + interest on the loan. This indicator can be considered as payment for financial assets placed at the disposal of enterprises or as income from equity or borrowed capital.
Cash flow. The amount of funds that an enterprise has at its disposal, albeit temporarily = net profit + accrued depreciation + reserve fund.
Denominator of absolute indicators:
Revenue from sales of products excluding VAT and excise taxes.
Net assets are the amount of funds invested in the enterprise = the amount of own sources of funds + the amount of long-term liabilities. Or the difference between the total balance sheet for the asset and the amount of short-term liabilities.
Profitability indicators can be calculated either for a specific date or based on average annual data.
3. These indicators are divided into:
profitability indicators of the enterprise
return on equity indicators
indicators of profitability of enterprise assets.
Profitability indicators:
1. The amount of all income of the enterprise (thousand rubles):
∑∂ = 2110 + 2310 + 2320 +2340 ± 2430 ± 2450 ± 2460
2. Return on assets:
Shows how much the company received in total income from each ruble invested in assets.
3. Sum of all expenses:
∑ρ = 2120 + 2210 + 2220 + 2330 + 2350 + 2410 ± 2430 ± 2450 ± 2460
4. Cost effectiveness:
where is profit before tax.
Shows how many kopecks of total profit the enterprise receives from each ruble of total expenses.
5. Profitability of expenses:
If< 1, то финансовый результат убыток.
6. Share of revenue in total income:
Shows how much revenue is included in all income received by the enterprise. If > 50% this means that the enterprise receives income related to the operating activities of the enterprise.
Business activity indicators
In a broad sense, business activity means the entire range of efforts of a company aimed at its promotion in the product, labor, and capital markets. In a narrower sense, business activity is expressed in the dynamism of the organization’s development, in the speed at which it achieves its goals.
In the financial aspect, business activity is manifested, first of all, in the turnover of the enterprise’s property and its components.
Turnover is characterized by two indicators:
The turnover ratio shows the number of turnovers made by the assets of the enterprise and its components during the analyzed period;
The full turnover period is the average period during which the company returns money invested in assets and their components.
1. Asset turnover (property, capital).
1.1. Asset turnover ratio (property, capital):
,
Where IN- revenue;
Average assets;
Average size of property;
Average capital.
; 
.
1.2. Period of complete turnover of assets:
,
Where D- analyzed period in days.
2. Turnover of current assets.
2.1. Current assets turnover ratio:
where is the average value of current assets.
.
2.2. Turnover period of current assets:
.
Attraction (release) of current assets as a result of slowdown (acceleration) from turnover:
,
Where t 1 And t 0- turnover period of current assets of the reporting and previous year.
A result with a minus sign indicates an acceleration in the turnover of current assets and their release from circulation. A result with a plus sign indicates a slowdown in the turnover of current assets and their additional attraction into circulation.
3. Inventory turnover.
3.1. Inventory turnover ratio:
Where s pr.- cost of sales;
Average inventory...
.
3.2. Inventory turnover period:
.
4. Accounts receivable turnover.
4.1. Accounts receivable turnover ratio:
where is the average amount of accounts receivable.
4.2. Accounts receivable turnover period:
This indicator tells how many days, on average, debtors repay their debts.
5. Accounts payable turnover.
5.1. Accounts payable turnover ratio:
,
where is the average amount of accounts payable;
Full cost of sales.
5.2. Accounts payable turnover period:
This indicator tells how many days on average a company pays off its debts.
HELL. Sheremet recommends calculating capital productivity indicators as part of the analysis of business activity.
1. Capital productivity of fixed assets:
Where IN- revenue;
Average value of fixed assets according to form No. 5..
.
This indicator tells how much revenue in value terms the company receives from each ruble invested in fixed assets.
2. Capital productivity of the active part of fixed assets:
This indicator tells how much revenue in value terms the company receives from each ruble invested in machinery, equipment and vehicles.
Also, to analyze business activity, the ratio of receivables and payables is considered.
The following indicators are also calculated:
1. Duration of the operational (production and commercial) cycle:
.
Shows how many days on average the financial resources of the enterprise are immobilized in inventories and receivables.
2. Duration of the financial cycle:
Among the qualitative indicators of business activity are:
1. current indicators:
1.1. presence of stable buyers and suppliers;
1.2. breadth of product markets;
1.3. product competitiveness;
1.4. business reputation;
1.5. impact on industry or regional price levels;
2. qualitative and promising indicators:
2.1. acquisition of new high-tech equipment;
2.2. modernization of production technology;
2.3. attracting highly qualified personnel;
2.4. active participation in government programs and receiving promising profitable orders.
To characterize business activity, the economic growth sustainability coefficient is calculated:
,
Where P- profit;
D&P- dividends and interest on securities;
Average equity capital.
.
This ratio shows the percentage rate at which equity capital increases or decreases in the course of the enterprise’s economic activities.
The economic feasibility of operating an enterprise in a market economy is determined by the receipt of income. The profitability of an enterprise is characterized by absolute and relative indicators.
The absolute indicator of profitability is the amount of income or profit. In specialized foreign literature, the concept of “income” is defined as follows:
“Earnings are an increase in economic benefit during an accounting period in the form of an inflow of funds or an increase in the value of assets or a decrease in liabilities, resulting in an increase in capital, unless such growth is provided by contributions from shareholders” (15),
This concept is more briefly defined in the Decree of the President of the Republic of Kazakhstan, which has the force of Law, dated December 26, 1995 No. 2732 “On Accounting”, where Article 13 states: “Income is an increase in assets or a decrease in liabilities in the reporting period” ( eleven). Without making the appropriate expenses, as a rule, it is impossible to obtain the desired income. Without receiving income, in turn, it is impossible to develop the enterprise and successfully resolve social issues.
The system of profitability indicators consists primarily of absolute indicators of financial results, which include: income from sales of products (works, services); gross income; income from core activities; income from non-core activities; income from ordinary activities before taxes; income from ordinary activities after tax, income from extraordinary situations; net income, which is the final financial result of the enterprise's activities.
Income in a generalized form reflects the results of management, the productivity of living and materialized labor costs. Some economists attribute it to indicators of economic effect, others - to the efficiency of an enterprise. In our opinion, the first ones are right, since the absolute amount of income does not allow us to judge the return on investment.
The role of income in market conditions has increased significantly. As is known, under a planned-directive economy, its role was diminished. Generating income (profit) as an objective function of any enterprise was downplayed. With the transition to a market economy, income (profit) became its driving force. It is he who determines the solution to three fundamental interrelated problems of what to produce, how to produce and for whom to produce. Generating income has become the goal of the functioning of any enterprise, since in a market economy it is the main source of its production and social development. Income growth creates a financial basis for self-financing, which is a prerequisite for the successful economic activity of an enterprise. This principle is based on full recovery of costs for the production of products and expansion of the production and technical base of the enterprise. It means that each enterprise covers its current and capital costs from its own sources. If there is a temporary lack of funds, the need for them can be met by short-term loans and commercial loans when it comes to current costs, as well as long-term bank loans used for capital investments.
At the expense of income, part of the enterprise’s obligations to the budget, banks and other enterprises and organizations is also fulfilled. Thus, income becomes the most important indicator for assessing the production and financial activities of an enterprise. It characterizes the degree of his business activity and financial well-being. Income determines the level of return on advanced funds and the return on investment in the assets of a given enterprise.
The role of income in a market economy is determined by the functions it performs. In the specialized literature of the CIS countries, there is no consensus on the issue of the income function. They are attributed to him from two to six. In our opinion, it performs only two functions: 1) a source of revenue for the state budget, 2) a source of production and social development of enterprises and associations.
The unity of functions in their interdependence makes income the element of management in which the economic interests of society, the enterprise team and each employee are linked. This makes clear the importance of the problem of the formation and distribution of income, the practical solution of which ensures the necessary dependence of the efficiency of an economic entity on the amount of income received and left at its disposal.
In order for income to effectively perform its functions, the following basic conditions are necessary:
Prices for products should, with a certain degree of approximation
express socially necessary labor costs and do not take into account
continuous increase in labor productivity and cost reduction.
The system for calculating products and determining product costs must be scientifically based.
The income distribution mechanism should play an active role and serve as a stimulating factor for the development of production and increasing its efficiency.
Effective use of income is possible only in the system of all other financial levers (depreciation charges, financial
sanctions, taxation, excise taxes, rent, dividends, interest
rates, special purpose funds, deposits, shares, investments,
forms of payment, types of loans, exchange rates and securities, etc.).
It should be noted, however, that the absolute value of income refers to indicators of economic effect, and not to the efficiency of the financial and economic activities of the enterprise. An income of 500 thousand tenge can be the income of enterprises of different sizes in terms of scale of activity and size of invested capital. Accordingly, the degree of relative weight of this amount will be different. Therefore, for a more realistic assessment of the income received, relative profitability indicators are used, which include various profitability indicators that express the level of profitability and characterize the efficiency of the enterprise.
Both the business entity itself and the state are interested in the growth of the enterprise’s profitability indicators. Therefore, at each enterprise it is necessary to conduct a systematic analysis of absolute and relative profitability indicators.
The tasks of analyzing profitability indicators include:
Assessing the implementation of the plan for absolute profitability indicators;
Studying the components of net income formation;
Identification and quantitative measurement of the influence of factors affecting income;
Studying the directions, proportions and trends of income distribution, identifying reserves for income growth;
Study of various profitability ratios and
factors influencing their level.
The income of an enterprise is what a particular legal entity generally engages in its activities for. Thanks to this indicator, it becomes possible to expand, pay wages, purchase new equipment, purchase materials, pay for the services of third-party organizations, and so on.
Definition
The income of an enterprise is the money that a legal entity receives for providing its own services, selling goods, carrying out work, and so on.
Traditionally, income is calculated after all expenses that the company incurred in the process of performing its functions have been deducted from the funds received. Income is calculated for a specific reporting period and can be used for any suitable purpose.
Types of enterprise income
There is a certain division of funds received for performing services. There are such options as money received in connection with emergency situations, obtaining additional profit through the taxation system, enterprise income from various activities, and directly receiving funds from performing basic functions.
Sales income
The profit that was received by the company for the sale of goods, the implementation of work or the provision of services is the income of the enterprise. In accordance with current regulations, standards and laws, the concept of such factors includes any basic functions that have been fully implemented. That is, if these are goods, then they must be fully paid for and sent to the buyer (or removed by him from the warehouse himself). It should be noted that from the money that was transferred for the products, it is necessary to subtract any possible expenses such as fees and so on.
The situation is similar with works and services. They must be completed in a timely and complete manner, and funds for them must be received in the company’s account. An example of such a situation could be the simple sale of any goods. The seller and buyer enter into an agreement. Under this agreement, the seller produces (or resells) any products. The buyer picks it up (or receives it through transportation from the seller) and makes payment to the company’s account at a predetermined point in time. This can happen both before the actual receipt of the cargo and after this moment. Among other things, many other possibilities can be taken into account, such as payment as goods are sold to end customers or transfer of funds even before production begins. Much depends on the relationship and trust between the two parties to the transaction, their reputation, the peculiarities of the work process, established practice, and so on.
Gross income
If the main income of an enterprise involves receiving money for performing basic functions, then its gross type is the difference between the money received and the funds that were spent on the purchase of materials, maintenance or purchase of equipment, and so on. In fact, this is the profit that the company receives in its pure form, that is, when it is clear exactly how much money was spent on creating the product and how much was received for it.
The following situation may serve as an example. A company purchases the materials required to produce a product. She spends money on it. Now you additionally need to purchase equipment, pay salaries to employees, and so on. This is also all considered expenses. Then, as a result, products are produced that are sold to the buyer. This is already income. The difference between the amounts that were spent on creating the product and those that were ultimately received is
Income from core and non-core activities
The financial income of an enterprise from its core activities is the next stage of calculations, which takes into account the previously calculated, with the exception of all funds spent on the general activities of the company for a certain point in time. That is, if in the previous paragraph only those expenses were taken into account that were incurred by the company in the process of creating a product or providing a service, then here almost everything that is possible and that cost the company money before making a profit is already taken into account.
There is also other income for the enterprise. These are the funds that it receives from some extraneous activities that are not directly related to the main functions, but also allow for a certain profit. There are a lot of such options, and they directly depend on the characteristics of a particular organization. An example of this is the receipt of profit from the rental of company property by other persons, from deposits, the sale of fixed assets, materials, ownership of shares, and so on. This can be clearly seen using this example: there is a certain company that sells its products. To receive it, she may offer, for a fee, to transport the ordered product to a specified point, unload it, install it, teach how to use it, and so on. The sale of products itself is the main income, and everything else - transportation, installation, etc. - is no longer the main activity.
Taxation and income
Among other things, income is directly related to taxes. Thus, they distinguish those profits that exist before the payment of money to the state budget and their balance after the implementation of this operation. The first option shows a more honest income that was received as a result of the company’s activities, but they focus mainly on the second option. This is due to the fact that taxes will still have to be paid, and it is much easier to immediately take this factor into account, distributing funds that will definitely not go anywhere between different directions, than to cut off funding in the future due to incorrect calculations.
In some cases, a business is entitled to a refund of previously paid taxes. That is, you will still have to give the money back first, but there is a high probability that it will eventually end up in the account again. Considering the fact that it is not always possible to calculate exactly when such a return will occur, it is extremely difficult to predict anything on this basis. However, it is still worth taking into account a certain amount that can be spent usefully in the future.
Emergencies
Despite the fact that in most cases, various non-standard moments that can affect the work of the company most often lead to losses (in one amount or another), with a certain amount of luck and the presence of properly issued insurance, they can also become the reason for making a profit. For example, a situation occurs in which the insured equipment is damaged. The case fits as described in the contract with the insurance company, and it pays all due funds. At the same time, the damaged equipment was either not needed at all, or was planned for replacement. As a result, the amount of insurance payments may significantly exceed the money that the company could receive for the sale of unnecessary fixed assets.
A good example: there is a company that produces a product. Then she sells it and gets paid for it. The next step is to pay taxes and, as an option, incur certain costs associated with force majeure situations. That is, the goods are sold, money is received, then taxes are paid. Then, for example, a flood occurs, and repairs are carried out from the funds calculated in the previous paragraph, and only what remains can be considered the company’s net income.
Results
From all that has been said above, it follows that the financial activities of an enterprise in terms of receiving funds for performing its functions are divided into several stages, at each of which it is possible to calculate certain types of income. They can both carry useful statistical information and be taken into account in the future for subsequent calculations, determining the future capabilities of the company, and so on.
The income of an enterprise is the basis on which all activities rest. It is the meaning of the functioning of a legal entity (at least most of them). Of course, there are also companies that do not make generating income their main responsibility. However, they also have income from charitable funds, from performing any non-core work, and so on.
profitability depreciation charge
Income is money received as a result of business activities over a certain period of time. This is the result of the work of an enterprise, an individual, or the entire society in monetary terms.
In a market economy, the main sources of income are: the labor activity of hired personnel and liberal professions; entrepreneurial activity; own; funds of the state and enterprises, distributed in accordance with membership in a certain social group and category of personnel; personal subsidiary plots (LPH); income from illegal activities.
Profitability is the primary incentive for creating new or developing existing enterprises.
The income of an enterprise is recognized as an increase in economic benefits as a result of the receipt of assets and/or repayment of liabilities, leading to an increase in the capital of this organization, with the exception of the main contributions of participants (owners of property). The organization's income is divided into: income from ordinary activities; operating income; non-operating income; extraordinary income.
The main share in the total income of an efficiently operating enterprise is occupied by income from ordinary activities. Ordinary activities mean the manufacture of products, resale of goods or provision of services, i.e. those types of activities for the purpose of which the enterprise was created.
In general, the performance of any enterprise can be assessed using an absolute indicator - profit and a relative indicator - profitability.
Profit is net income expressed in monetary terms, representing the difference between total revenue and total costs. An enterprise makes a profit if sales revenue exceeds the cost of products (works, services) sold.
In general, the profit indicator can be calculated as follows:
Where P is profit from sales; VR - revenue from the sale of products (works, services); C is the cost of products sold (work, services).
From this formula it follows that any change in revenue or cost entails an adequate change in profit.
They distribute profits by directing them to the budget and according to items of use in the enterprise.
Initially, the total (gross) profit is determined, which takes into account the profit from all activities of the enterprise.
The main part of the total profit of the enterprise is obtained from the sale of marketable products at current prices without VAT and excise taxes on the costs of production and sale of these products.
The total profit excludes income from leasing and other types of use of property, as well as profit from intermediary operations and transactions, tax calculation for which is carried out in a different manner. Income of legal entities from government securities, as well as from the provision of services for their placement, are also excluded from gross profit, since they are not subject to tax at all.
After these adjustments to gross profit, taxable profit remains, on which income tax is paid.
In accordance with the law, net profit is gross profit minus all taxes on profits received from various forms of economic activity. The net profit remains at the disposal of the enterprise, is used by it independently and is directed to the further development of business activities.
The goal of entrepreneurial activity is not only to make a profit, but also to ensure high profitability of business activities.
Profitability is a relative indicator of production efficiency, characterizing the level of return on costs and the degree of use of resources. Profitability is an indicator that comprehensively characterizes the efficiency of an enterprise. With its help, you can evaluate the effectiveness of enterprise management, since obtaining high profits and a sufficient level of profitability largely depends on the correctness and rationality of management decisions made.
The construction of profitability ratios is based on the ratio of profit either to the funds spent, or to the proceeds from sales, or to the assets of the enterprise. Thus, profitability ratios show the degree of efficiency of the company.
In a market economy, a variety of factors influence the profitability of an enterprise. They can be classified according to a variety of criteria.
Depending on the direction of activity, they can be combined into 2 groups: positive and negative.
Depending on the place of origin, all factors can be classified into internal and external.
All internal factors can be divided into objective and subjective. Objective factors are those factors whose occurrence does not depend on the subject of management. Subjective factors make up the absolute majority; they completely depend on the subject of management.
In the current difficult situation, one of the most important tasks of an enterprise is to find possible ways to avoid bankruptcy and increase profitability. Income growth, which is the main indicator of the break-even operation of an enterprise, depends primarily on reducing production costs, as well as on increasing the volume of products sold, while such products and goods must be produced that meet consumer requirements and are in great demand.
Activities related to improving the use of working time have a significant impact on cost reduction. For many industries that are material-intensive or energy-intensive, the most important area of cost reduction is saving materials and energy resources.
Currently, cost reduction should become the main condition for increasing profitability and profitability of production.
No less important factors influencing the profitability of an enterprise are changes in production volume. The larger the sales volume, ultimately, the more profit the company will receive, and vice versa.
Improving the quality of manufactured products can be achieved through many factors, such as technical improvement of production and modernization work. Obviously, the quality of products determines the price level of the enterprise, which significantly affects the amount of profit.
It should also be taken into account that the amount of profit, and therefore the profitability of the enterprise, is affected by changes in the balance of unsold products. In order to increase profits, the enterprise must take appropriate measures to reduce the balance of unsold products, both in quantitative and total terms.
Recently, in the context of the development of entrepreneurship, there have been more opportunities to increase profits through non-sales operations. In this area, financial investments can be the most profitable. Specific directions and structure of financial investments must be the result of a well-thought-out enterprise policy based on a reliable assessment of their effectiveness.
A business can also rent out some of its assets and ultimately receive income that increases its gross profit.
From this list of measures it follows that they are closely related to other measures aimed at reducing production costs, improving product quality, and more efficient use of all factors of production.
It is very necessary for an enterprise to determine the so-called break-even point of production and sales of products. The break-even point corresponds to the sales volume at which the company covers all fixed and variable costs without making a profit. Using the break-even point, the threshold beyond which sales volume ensures profitability is determined. Moreover, when determining strategy, the company must take into account the margin of financial strength. Having a large margin of financial strength, an enterprise can develop new markets, invest funds both in securities and in production development.
When determining the break-even point and the margin of financial strength, entrepreneurs can plan the amount of profit growth depending on economic success in the production of competitive products and take appropriate measures in advance to change in one direction or another the value of variable and fixed costs.
