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# How to calculate the profitability of core activities

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By calculating several financial indicators based on the analysis of balance sheet data, you can partially assess the financial condition of the enterprise.

On the other hand, using the calculations presented below, any enterprise can assess the partial financial condition of its own counterparties to whom the products are delivered.

Instructions

1

One of the key business indicators thatShows the success and effectiveness of the work of any company - this is an indicator of the profitability of its core business. Coefficients of profitability characterize the profitability of the company. Along with other coefficients of financial analysis, profitability indicators are calculated on the basis of data from balance sheets. These include the balance sheet (form number 1), the profit and loss account (form number 2) and a number of other documents. However, in order to calculate the profitability of the main activity, these two are quite sufficient.

2

Coefficient of profitabilityActivity & nbsp- (OD) shows the amount of net profit received by the nbsp-company from 1 ruble spent for production. With an effectively organized business process, this indicator should grow with time. To calculate it, divide the profit measure from sales from the profit and loss account by the value of the cost of production. For convenience, use the formula attached to the form number 2:

Coefficient of profitability ML = profit from sales / costs of production.
The coefficient of profitability ML = p. 050 / (p.020 + p. 030 + p. 040).

3

Another important indicator of financial conditionThe company is the return on sales ratio. In contrast to the OD coefficient, it shows the amount of net profit that each company earns 1 ruble of revenue. The growth of this coefficient reflects an increase in the profitability of core activities and means an improvement in the financial condition of the enterprise. To calculate the profitability of sales, use the formula (based on the form number 2):

Coefficient of sales profitability = profit from sales / sales proceeds.
Coefficient of profitability of sales = p. 050 / p. 010.

4

Along with the indicators of profitability of activitiesIn the financial analysis, other coefficients are also applied. For example, the coefficients of business activity, which reflect the effectiveness of the company's own funds. These include the turnover ratio & nbsp- (an indicator of the effectiveness of the use of all available means at the disposal of the enterprise), inventory turnover (the speed of sale of inventory in days), and other indicators.

How to calculate the profitability of core activities Was last modified: May 21st, 2017 By
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