What does production profitability mean? Analysis of enterprise profitability indicators. Production profitability - what it shows

Market entities conducting business activities must regularly analyze the final results of the work performed, as well as the effectiveness of the efforts spent. Each such analysis should end with a summing up of results that will indicate further prospects for the development of business. If you need to perform an economic analysis of activity, profitability will become practically the main factor.

What is profitability?

The term “profitability” means a certain indicator that determines economic efficiency, characterizing the profitability of entrepreneurial “labor”. Using this parameter, the manager can understand whether the enterprise is effectively using the resources at its disposal. Such resources may include financial, natural, as well as labor and economic resources. In simple terms, profitability is the ability of a company to generate income from its activities in excess of its expenses.

If we talk about the sphere of activity of non-commercial structures, it should be noted that the profitability indicator in this case can be considered the effectiveness of the work performed by it. When it comes to commercial organizations, accurate quantitative indicators are important. Modern economic theory compares profitability with an indicator such as efficiency, which is the ratio of the sum of final costs and the final profit received from the company's activities.

In other words profitability indicator is a simple ratio of expenses and income received. If, summing up the results for the previous year, the accounting department announced that the company made a profit, the business is considered profitable and pays off.

Types of profitability

Today, profitability can be presented in different forms, because determining the efficiency of a business may require calculations of different content. When making calculations for different business areas, you need to take into account that the coefficients and formulas for calculating them will be different. Profitability happens:

1. Overall profitability of non-current and current assets. This characteristic indicates financial loans that were used by the organization to increase profits in the amount of 1 ruble. The coefficient is calculated based on profit ratio, which appeared on the balance sheet of the enterprise before payment of the full amount of established taxes, and the average price of all assets at the disposal of the company in a specific period of time. Total profitability can be calculated for a quarter, half a year, year or month and represents the ability of the enterprise's assets to increase profit. If it is necessary to calculate the profitability of asset formation, you need to divide the amount of profit before taxes by the calculated average cost of assets that were attracted exactly in that time period;
2. Product profitability - an economic indicator that acts as a ratio between the profit received from the sale of goods and the costs associated with their production. The resulting coefficient will give an assessment of the profitability of the production of each specific product;
3. Profitability of production implies a specific economic coefficient that allows you to adequately assess the feasibility of running a business. To calculate it, it is necessary to calculate the ratio of costs and net final profit. If the balance sheet profit indicator and the balance of fixed costs are positive, the production operation can be considered profitable. To increase production profitability, it is necessary to reduce the final production cost, leaving its quality the same or improving it.

Types of profitability and calculation formulas

To fully reveal concept of profitability in each of its types, visual formulas should be presented, which can be used to give examples of calculations. Profitability ratio:

1. ROA=Profit/Asset price*one hundred percent. ROA is an indicator indicating the return on assets. The total assets should take into account not only the assets owned by the enterprise, but also the assets that were attracted, for example, loans or receivables;
2. ROFA– an indicator that determines the profitability of fixed assets of production. The coefficient is calculated according to a scheme similar to the previous indicator and is used to assess the efficiency of using not assets as a whole, but fixed assets. Therefore, the formula indicates the cost of fixed assets directly;
3. ROE– an indicator of return on capital, which is equal to net profit divided by the amount of authorized capital multiplied by one hundred percent. The coefficient helps to understand how correctly the organization’s personal funds are used. The amount of credit funds used for production is shown by the difference between the indicator indicating the efficiency of use of assets and the profitability of liabilities. You should also know that the resulting indicator is one of the basic coefficients used for effective analysis of the work of enterprises registered in developed countries;
4. ROI– return on investment indicator - a coefficient that gives an adequate assessment of the profit that was received from the initial investment. That is, this coefficient is the ratio of the profit received as a result of investment and the material amount of the initial investment. You can demonstrate the effectiveness of investments more clearly by considering a situational example with the purchase of shares. For example, an investor bought Gazprom shares for the amount of 149 rubles 50 kopecks, but after a while he noticed a decline in this segment of shares on the market from securities and decided to liquidate the current position by selling shares for 135 rubles 20 kopecks. The loss amounted to 14 rubles 30 kopecks. Let's summarize. As a result, the investing person receives a negative efficiency equal to -9.56%. That is why this coefficient cannot be called the main one, since it tends to reflect situations that arise only with certain operational flows, for example, financial investments of borrowed capital;

If we talk about calculating the efficiency of an enterprise's business activities, it should be noted that calculations should be carried out taking into account one-time and current costs. Modern economic theory distinguishes between production profitability and product profitability:

1. ROM– the product profitability indicator is considered a coefficient that shows the level of efficiency of all material expenditures. Here we are talking about the ratio of the profit that was received during the sale of products and the cost of the goods sold. The indicator can be calculated for each specific unit of goods and for all products as a whole. In this case, the formula will be like this:

RP=(P/SP)*100%, where RP is the profitability indicator, SP is the cost of goods sold, P is profit;

1. Profitability of production is the degree of efficiency in the use of property owned by the enterprise, which includes working capital and fixed assets. Formula:

RP=(PB/(F os.f. + F ob.sr))*100%, where RP is the production profitability ratio, expressed as a percentage, PB is balance sheet profit, F os.f is the price of fixed assets, F os.f. f – the amount of working capital.

Additional types of profitability indicator

In addition, profitability can be reproduced by the following indicators:

1. ROS- return on sales is the ratio of profit received from the sale of the product range sold and the company’s revenue. To put it simply, the ratio is the ratio of net profit remaining after deducting tax deductions and sales volumes. The indicator displays the percentage of profit included in each ruble earned by the organization. Using this coefficient, the cost of each product is formed. The indicator also provides an adequate assessment of the company’s costs;
2. ROL– indicator of labor profitability, which is shown as the ratio between net profit and number of employees, registered at the enterprise in a certain period of time. In other words, the organization's managers must control the threshold of the number of employees at which it will be possible to obtain maximum profit;
3. The profitability of contracting services is calculated as follows:

R other services = (3 non-rep. – 3 rep.)/3 rep.

When working with contractors, it is also necessary to take into account that if the plan is not fulfilled, the contractor will suffer significant losses, for example, fines and other sanctions.

Ways to increase profitability

To determine trends in fluctuations in profitability of sales, it is necessary to establish a reporting period and a base period. As a basis for the base period, you can take the indicators that were calculated for the last quarter or year, when the profit earned by the company was maximum. Next, the coefficient of the reporting period will be compared with the coefficient for the base period.

Return on sales can be artificially increased. To do this, it is necessary either to increase the price of the goods sold or to reduce the cost. To make the right decision, a company must take into account the following factors: fluctuations in consumer demand, market dynamics, assessment of the work of competitive organizations, and so on.

In general, to improve profitability, profitability must be improved. You can do this in the following ways:

1. By increasing production capacity. The use of technological progress requires additional material investments, but allows for savings in the further course of the production process. Production equipment already in place at the enterprise can be modernized, thereby saving resources and increasing labor efficiency.
2. Improving product quality can significantly influence the increase in demand;
3. Having developed a competent marketing policy, which will be based on product promotion through the use of market conditions and customer preferences. Large enterprises have entire departments dedicated to marketing. In small enterprises, the functions of a marketer are performed by managers.
4. By reducing the cost of the product range sold. This can be done by finding suppliers who offer the necessary raw materials, products or services at prices lower than those of competitors. The main thing here is to monitor the quality, which should not suffer.

The economic tools of a modern business person are replete with various indicators. All of them serve as an information base for developing tactics and strategies for behavior in the economic environment. An experienced top manager can get an idea of ​​the overall health of any company by analyzing several key ratios, one of which is the profitability of the enterprise. So, how to calculate the profitability of an enterprise?

Enterprise profitability is an indicator that demonstrates how much added value can be obtained from each monetary unit invested in the company.

In simple words, if we abstract from the details, it turns out that if a businessman’s revenue is 1000 rubles, and expenses are 500 rubles, and profit, accordingly, is 500 rubles. (1000 rubles minus 500 rubles), then the profitability of the company of such an enterprise is 100%. (500 divided by 500, and all this multiplied by 100%).

You can find out what the average number of employees is and see a sample report on this indicator

Formula and examples for calculating profitability

In a simplified form, the formula for calculating the profitability of an enterprise looks like this:

• P – profit
• Z – all costs of creating a product.

For a clearer understanding of the calculation formula, it is proposed to consider a few simple examples.

Let the Bukinist company earn 100,000 rubles from the sale of its products. All company costs (resources, equipment, labor, (including management personnel) and infrastructure) amounted to 80,000 rubles.

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Profit is equal to the difference between revenue and costs: 100,000 rubles. minus 80,000 rub. equals 20,000 rubles. Calculation of the profitability of the Bukinist enterprise using the above formula will look like:

20,000 rub./80,000 rub.*100%=25%

Thus, the profitability of the Bukinist company is 25%

The last example: let the Sputnik company receive an income of 600,000 rubles for a certain period. The costs of producing goods during the same period amounted to 200,000 rubles. Then the profit (the difference obtained after subtracting expenses from revenue) will be equal to:

600,000 rub. minus 200,000 rub. = 400,000 rub.

So, there is:

• Profit - 400,000 rubles.
• Costs – 200,000 rub.

The calculation of the profitability of the Sputnik company will look like:

400,000 rub./200,000 rub.*100%=200%

In this case, the profit is two hundred percent.

In reality, there may be many costing options. If the company opened quite recently (less than a year), then it simply does not make sense to calculate the profitability of the enterprise, since the turnover of the initially advanced capital takes a period of several years.

In what order the shares of LLC participants are distributed, you can read

Scheme: What is the profitability of an enterprise?

Where and when is this indicator used?

• When managing a company. Knowing the value of the enterprise's profitability indicator for a certain period of time, the manager can determine, through analysis of the components of its formula (profit and expenses), where there are problems.
• Forecasting possible profits. Having information about the average profitability of an enterprise, a manager can predict with sufficient accuracy how much profit he will receive.
• Justification of investment projects. Such a summary indicator as the profitability of an enterprise is the most powerful argument for potential investors: having an idea of ​​the expected amount of investment and the average profitability of the enterprise, an investor can easily calculate for himself the future benefits of an investment project.
• If the enterprise is a subject of trade. The fact is that the profitability of an enterprise, along with liquidity, is one of the most important categories that affects the value of the company.

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What factors influence the profitability of an enterprise?

The reasons for changes in the indicator under consideration can be divided into endogenous and exogenous. Exogenous ones include:

• Geographical location. Localization of production has a strong influence on the price level, and therefore profits.
• Level of competition. Competition affects price and therefore profit margins.
• Market conditions. It determines the price at which the product will be sold.
• Quantitative parameters of such categories as the money market and the asset market. A ruble received at one government interest rate and the same ruble at another have different purchasing power.
• State tax policy. Taxes directly affect how much profit an entrepreneur will receive.
• Political situation. For example, the latest sanctions applied to Russia have a negative impact on the profitability of Russian companies.

Endogenous factors are divided into production and non-production.

Towards endogenous non-productive factors relate:

• Efficiency of supply chains and marketing. This affects the entrepreneur's costs.
• The need for measures that eliminate or compensate for the environmentally harmful effects of production activities. If the law obliges to take actions to eliminate the negative consequences of the production process, this is included in the costs.
• Availability of conditions for normal work activity. When a worker is provided with the necessary infrastructure for normal work, labor productivity increases, which reduces the cost of manufacturing goods.
• Financial policy. Financial activity is multifaceted; it implies both efficiency and its various types.

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For example, thanks to a good performance in the asset market, the company will have more sources to pay off its own obligations without attracting credit funds, for the use of which you also need to pay a price in the form of interest. And this is reflected in the total costs of the company.

Endogenous production factors affecting the profitability of an enterprise are also divided into:

• quantitative(for example, an increase in the number of workers, means of production, objects of labor)
• quality(use of progressive, resource-saving technologies, in other words, increasing labor productivity).

Naturally, these factors, like all others, play their role only when are economically justified(for example, if the quantity of products sold falls, then, other things being equal, there is no point in hiring new workers).

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Thus, the profitability of an enterprise is a fundamental, key index that allows assessing the efficiency of a company. Among the factors influencing it, it is necessary to highlight endogenous production quality, since it is the increase in labor productivity that is the main source for maximizing profits.

Profitability is the main indicator of the success of any company. The higher it is, the more attractive the business is for the owner or investors. Read what profitability is and what it consists of. Plus, download our exclusive profitability analysis guide, which will help you quickly assess a company's ability to generate returns on its capital.

What is profitability

In simple words, profitability is the ratio of the profit received to the resources expended. Profitability shows how production and business costs work out, how they participate in fulfilling production plans and making a profit. It is the issue of enterprise profitability that comes first when investing in production, introducing innovations, training staff and other manipulations that increase the costs of business owners.

Traditionally, a business with high profitability is characterized by a markup of several tens or even hundreds of percent on the cost of production, taking into account depreciation of production facilities or other related expenses. Typically, this situation occurs when a certain product is in high demand and there is little competition in this market. Over time, profitability falls due to the fact that competition becomes fiercer, prices for a previously popular product or service are reduced, the market is saturated with offers and goods become abundant.

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How it will help: compare your company's profitability with the industry average. If profitability is lower than the industry average, the Federal Tax Service will recognize it as low and will come to the company with an inspection.

Overall profitability ratio

This is the main parameter, an indicator of economic profitability, which gives an idea of ​​the general state of affairs in the company. Investors and analysts are guided by it when studying the operation of an enterprise. It gives the first approximate impression of the work of the entire company as a whole, and of the effectiveness of management. However, when assessing performance, this indicator should be compared with the indicators of enterprises of a similar profile and from the same industry, or with the average market indicator.

To calculate the overall profitability ratio (ORR), the following formula is used:

OKR = (PDN / VP) x 100%,

where PDN is profit before tax;

Enterprise profitability level

To calculate the level of profitability, you can use the formula:

P = P / X x 100%,

where P is profitability,

P - profit,

X is the indicator whose profitability needs to be determined.

Return on sales ratio

This profitability indicator is one of the most frequently calculated. Abroad, it is traditionally referred to as ROS (Return On Sales). shows how much percent of profit each earned ruble received by an enterprise from the sale of a product or sale of a service brings and what its costs are. In the future, it is ROS that becomes the starting point for the formation of the organization’s pricing policy.

The ratio is defined as the ratio of net profit after tax for a certain period to revenue.

To obtain the coefficient (KRsales), the following formula is used:

KRsales = (PPN / VP) x 100%

VP - sales revenue.

In addition, the ratio shows how effectively the company controls costs and is used to assess the operating efficiency of the enterprise. To do this, the formula uses operating income instead of after-tax profit. If you use data on gross profit instead of net profit, the resulting ratio will show the efficiency of only the expenses necessary for the existence of the business. The dynamics of this parameter will allow you to track the quality of management of key business resources.

Return on assets ratio

In foreign business analytics, the abbreviation ROA (Return Of Assets) is used for this ratio. The indicator indicates how effectively assets are used to generate profit for each ruble of profit received, the company's overall ability to create profit by managing its assets.

To calculate the coefficient (KRassets) apply the following formula:

KRAtivov = (PPN / ((SAng + SAkg) / 2) x 100%

where PPN is profit after tax;

SAng - asset value at the beginning of the year;

SAkg is the value of assets at the end of the year.

Also for analysis, indicators of net assets (the value of assets minus the debts and liabilities of the enterprise) as well as working capital can be used.

Production profitability

This coefficient is calculated when it is necessary to determine how advisable it is to engage in a certain type of business. After all, the costs incurred for organizing production must be returned to the investor within the planned period, and the company must begin to operate profitably. Production profitability ratio will show how efficiently and with what return fixed and working capital and all property work.

The following formula is used for calculation:

KRpr = (BP / (Sof + Sos)) x 100%,

BP - balance sheet profit;

Sof - cost of fixed assets;

COS - cost of working capital.

Product profitability ratio

This indicator allows you to evaluate how efficiently the costs of production and sales of products and their cost are working. Such profitability can be calculated not only for the entire range of goods produced, but also for individual items that the company produces.

For getting product profitability ratio(KR products) apply the following formula:

KPproduction = (Prp / Srp) x 100%,

where Prp is profit from sales of products;

CRP - cost of goods sold.

Conclusion

Profitability indicators do not always accurately characterize all aspects of the enterprise. For example, with long-term investments, the indicators will not be high, so they must be constantly recalculated and the data obtained at different times must be analyzed. It is also possible that the value of assets changes over time, but the calculation takes into account the value obtained once, which does not change over time. This is incorrect, since the value of assets may change following changes in the general market situation.

In addition, each individual indicator does not reveal how risky a company is in its operations. To obtain a more detailed picture of the company’s performance, it is necessary to use additional analysis methods, for example, to calculate financial stability, current cost structure and other indicators.

The main goal of any business is to bring money to investors and owners. In other words, any business must be profitable. What does this concept mean and how to correctly calculate profitability? We will try to reveal this concept as much as possible in this article.

Basic definitions

Let's figure it out: What is profitability in simple words? Profitability is an indicator indicating the economic efficiency of a business. Knowing this value, you can understand whether the work scheme is effectively structured, whether it is possible to fight competitors, whether labor and economic resources are spent correctly.

Profitability is the economic efficiency of a business

There is profitability for non-profit organizations too. It shows the efficiency of the company as a whole, its efficiency. For commercial organizations, this parameter means the ratio of costs and profits. Roughly speaking, if a company shows a profit at the end of the year, then it is profitable.

Types of efficiency

Any businessman must understand that different sectors of the economy have different efficiencies. This means that there are several types of profitability and it would be wrong to compare them with each other.

1. Return on assets (negotiable and general). This indicator shows how much money an entrepreneur or company raised to make a profit of one ruble. In order to obtain this characteristic, you need to calculate the ratio of the profit received to the value of the total number of assets. Usually the calculation is done for a certain period of time (quarter, year). Essentially, return on assets measures how efficiently an asset can generate income.
2. Overall production profitability. This ratio shows whether it is advisable to run this type of business at all. To determine it, it is necessary to divide the total costs of production by the net profit received after its sale. In order to increase the coefficient, you can reduce production costs, raise the price of products, or increase the efficiency of the company.
3. Overall product profitability. In order to find it, you need to divide the profit received from the sale of goods by the amount of expenses spent on their production. Knowing this coefficient, you can understand whether it is profitable to produce a certain product or whether it is better to switch to others.

Other types can also be distinguished: return on investment, personnel and cost.

Note:When calculating the return on assets ratio, profit is calculated excluding taxes. To determine their attractiveness, you need to divide the company's profit by the cost of the assets involved over a certain period of time.

The profitability ratio is calculated in absolute figures, excluding taxes, etc.

How to count

In order to find the efficiency ratio of an enterprise, you should find out its financial indicators. Profitability itself, which is represented by the letters RO, is a relative indicator. Absolute indicators include profit, sales volume of goods (services) and revenue. Remember that comparisons cannot be made in absolute terms, as the results will be inaccurate. It is necessary to compare approximately equal enterprises in terms of profitability - this is the only way to get a correct idea of ​​efficiency.

A simplified profitability formula is used for calculation: RO=(Profit/Indicator)*100%. Here “Profit” means the total profit from the sale of goods/services. Calculations are allowed on the basis of net, balance sheet, gross and operating profit - these indicators can be found in accounting documents. An indicator is the point whose profitability is being sought. It is indicated in value terms.

Let's look at a small example. You need to calculate return on sales (ROTR). That is, in the “Indicator” field you enter the value of sales (revenue). In order to find it, you need to multiply the price by the sales volume (TR=P*Q).

Finding an efficiency ratio for an enterprise

To do this, you need to find the return on cost, which is referred to as ROTC (short for returnontotalcost). To do this, use the formula: ROTC=(PR/TC)*100%. PR is the profit received. TS - full cost. To find the PR coefficient, you need to use the formula PR = TR-TC, where TR is revenue (totalrevenue), and TC is the total cost. To find the vehicle, you need to add up all the costs of production: the purchase of raw materials, wages, utilities, advertising, warehousing, rent, etc. The resulting ROTC coefficient shows how much one ruble invested in the production of a product will bring.

Note:The ROTC coefficient can be calculated specifically for types of products, a specific workshop, branch, or enterprise.

Knowing the profitability of an enterprise, you can compare it with competitors and correct mistakes

Balance calculation

In order to calculate the efficiency using the above formulas, it is necessary to obtain the necessary data. They are all on the balance sheet. Let's figure it out How is profitability calculated on the balance sheet? . Twice a year, all the necessary information about the company’s existing assets and capital is entered into it. In order to calculate the required coefficients, you need to use:

1. Available assets.
2. Investment size.
3. The size of the company's capital.

Having received these values, find the average at the beginning and end of the selected period.

Let's look at an example: we need to calculate the profitability of non-current assets. Study the balance sheet and find the corresponding figures for the end of the previous period and the beginning of the new one. Add them up and divide by 2. Usually in statements the size of non-current assets is indicated in section 1, line 190. To calculate profitability, we use the formula: RO(a.in)=(PR/(VnAnp+VnAkp)/2)*100%. Here PR is the profit received, VnAp is the total value of non-current assets at the beginning of a new period, and VnAp is the value at the end of the previous period.

By calculating RO(a.vn) we find out how many kopecks one ruble invested in non-current assets brings.

When market entities conduct business activities, it is necessary to constantly analyze its results and the effectiveness of the efforts expended, as well as draw conclusions about the prospects for business development.

This is an indicator of profitability from the activities of the enterprise. The parameter shows how efficiently resources (natural, economic, labor, financial) are used. In a non-profit structure, profitability (P.) is considered operational efficiency. In business, accurate numbers are important. It is compared with efficiency - the ratio of total costs to total income. If at the end of the reporting year you are in the black, the business is considered profitable.

Main types

• General return on assets(and non-current). The characteristic shows which financial resources were used by the company in order to obtain a profit equal to 1 ruble. It is calculated from the ratio of income before payment of all taxes, as well as the value of the company’s existing assets for a specific time period (year, month, quarter). It is calculated by dividing income (before tax) by the average total cost of attracted assets for the same period of time;
• Product R.– the ratio between sales revenue and costs;
• R. production. Characterizes the feasibility of doing business, shows the ratio of costs to the final net income. Production is considered profitable if there is a positive balance. To increase the indicator, measures are taken to reduce costs and improve product quality.

Other types of profitability, calculation formulas

For the most complete disclosure of the concept, we will provide visual calculation schemes.

1. ROA = Profit ⁄ Value of Assets × 100%, where ROA – R. assets. Own and borrowed funds (accounts receivable, loans) are taken into account.
2. ROFA R. fixed assets (F). The indicator is similar to the previous one.
3. ROE = profit ⁄ capital × 100%, where ROE – R. capital. The ratio indicates how effectively the enterprise's own funds are used. The difference between asset and liability efficiency shows the amount of borrowing that is used in the business. The main coefficient when analyzing activities in developed countries.
4. ROI – R. investments. The relationship between income and the amount of initial investment. Let's look at stocks as an example. The investor bought Gazprom securities for 149.5 rubles, but noticing a decline in the market, sold them for 135.2 rubles. The loss amounted to 14.3 rubles. The result is a negative investment efficiency of 9.56% (14.3 ⁄ 149.5 × 100% = -9.56%). The ROI coefficient cannot be considered the main indicator of the company’s successful activities, because it cannot reflect situations that arise with operational flows (loans). But still the main turnover is reflected clearly.

The analysis of economic activities is carried out taking into account current and one-time costs. The following coefficients are distinguished:

• ROM R. products. Indicates the ratio of income from product sales to its cost. Calculated for all supplied goods and for individual types. Formula:

Rp= (P / Sp) × 100%,
where Рп – Р. products, П – profit received from sales, Сп – production cost.

• The production profitability ratio assesses the degree of efficiency in the use of the organization’s property (PF and ). Formula:

Rp= (Pb / (Phys.fund. + Phob.funds)) × 100%,
where Рп – R. of production (%), Pb – balance sheet profit (thousand rubles), Phos. fund – cost of fixed assets (average for the year, thousand rubles), Fund.funds – size of fixed assets (thousand rubles) .

Additional views

• Coefficient profitability of sales– ROS (return on sale). It is calculated by the ratio of net income from the sale of goods to the company’s revenue. The parameter reflects the percentage of profit in each ruble earned. Based on this, prices are formed and the company's costs are displayed.
• ROL – Personnel R.. The relationship that arises between the net profit of an enterprise and the average number of employees. It is necessary to comply with a quantitative threshold to obtain maximum income.
• R. contracting services. The parameter is obtained by dividing the difference between the costs of performing the work. Calculated using the formula: Rsub.services = (Znepred. - Zrepresentation) / Zrepresentation. If the contractor fails to fulfill its obligations, it will suffer losses that will be associated with fines.

Conclusion

When doing business, analyze the results of your work and evaluate the effectiveness of your efforts.