Return on sales based on operating profit. What profitability is considered normal: calculation rules and definitions. Return on sales ratio. How is profitability calculated? calculation formula for balance sheet and IFRS

This economic category was introduced to describe how efficiently an enterprise's overall operations are conducted. , or by individual components. For example, according to working capital. It helps you understand how many kopecks you can get by investing one ruble in a particular business. If we talk about sales efficiency, then profitability shows the share of profit in revenue.

To determine the indicator you need to use . The main thing is to remember that there are several of them, one for each type of indicator:

• The general level of the indicator is calculated as follows. All income received, constituting the balance sheet profit, is divided by the result of adding the average price by current assets, and the average price category of the main part in production. We multiply the result of previous actions by one hundred percent.
• Selling profitability is highlighted separately.
  PP = dividing income from the sale of goods by net profit after all operations. It is impossible to do without introducing a standardized average value bar. It will help summarize many calculations that have already been made. This produces a special number with an average result.
• By assets. To determine net production income, divide it by the value of assets in a given time period.
• By investment. V pure form divided into reserves equity, to which are added liabilities designed to last for a long time.
• In terms of capital available to the enterprise. To calculate the net profit, divide it by the entire amount of savings.

Definition of Negative Profitability

For managers, a negative profitability indicator is an important signal. It shows how unprofitable the production turned out to be in a particular case. Or a negative result on sales of a certain product. Negative profitability occurs with higher production compared to a decrease in operating profit. And the total price is not enough to cover all production costs.

The greater the negative profitability according to absolute data, the greater the deviation of the price level from the equilibrium value that could be considered effective.

Negative profitability shows that management is not effectively using available funds.

What indicators are considered acceptable?

To protect itself, each enterprise must conduct research on its main facilities and types of products in advance. Implementing the following recommendations will have a positive impact:

• Calculation of the total tax burden, and comparison with similar data related to a particular activity.
• Calculation of burdens associated with income tax. For manufacturing enterprises, the figure is low – 3% or less. Trading organizations are considered unprofitable at less than 1%.
• The next step should be the value of the share of deductions in the amount of tax, which is calculated from the tax base. This figure should not exceed 98%.

Specific data on areas of activity

There is no single indicator; in each industry it is calculated separately for each year. Profitability in the mining industry is considered normal at 50%. For the woodworking sector it does not even reach 1%. For services, a level of 12-20% is considered acceptable.

Conducting cost-benefit analysis

The profitable parameter is also called the profitable rate. Because the indicator reflects how much profit there was after the sale of services and goods with work.

If parameters in this direction fall, it means that the demand for products and the level of their competitiveness decreases. Then we need to think about additional measures to stimulate demand. There is a need to develop new market niches, or in improving the quality characteristics of the product.

When is it carried out? factor analysis In terms of profitability of sales, the influence of figures on how prices change in goods and services with work and how it affects the cost level deserves special consideration.

Isolating a reporting period and a reference time is required to identify trends in changes in profitability in sales. The base period allows you to use for:

• last year
• time when the company makes the greatest profit

The base period is needed in order to compare the indicators with what was taken as a basis during the calculations.

Reducing costs or increasing prices for the range offered helps increase profitability. An organization must focus on several parameters at once in order to make the right decision. We are talking about competitive activity and its assessment, the possibility of saving internal resources, fluctuations in consumer demand. The dynamics of market conditions are also studied separately.

It is planned to use tools that have become an integral part of the policy on goods and prices, sales, and communications.

Profits are also being increased in several directions at once:

1. Motivation for staff. A separate sector in management activities becomes proper organization personnel labor. Sales of the final product, reduction of defects in products, production of products with more high quality. Incentive and motivational strategies will improve the quality of work performed by employees. For example, holding events and so on.
2. Cost reduction. To do this, you need to identify suppliers whose prices are much lower than those of competitors. Despite the savings on materials, it is necessary to ensure that the final quality of the product does not decrease.
3. Creation new policy in the field of marketing. Product promotion should be based on research of market conditions and consumer preferences. IN large companies They create entire departments that deal specifically with marketing. Or hire a separate specialist responsible for carrying out marketing activities. This policy is not complete without financial investments, but the results are fully justified.
4. Determination of acceptable quality. Demand is increasing only for quality items. An enterprise should take all measures to increase it if profitability indicators noticeably decrease.

Return on sales - economic indicator, reflecting the company’s income for each ruble received as a result of sales, or reflecting the share of profit in total volume goods sold or products. Return on sales comes from the German concept rentabel - profitable or profitable, and has been an economic and marketing relative indicator since ancient times. economic efficiency sales activities.

In practice, sales efficiency is determined by the return on sales ratio. Calculation formula return on sales ratio- attitude net profit company to revenue and multiplied by 100%

Coeff. Rentab.Sales = (Profit / Revenue) * 100%

The Western accounting system declares the concept Return on Sales (ROS) and gives the following calculation formula:

Operating Margin = Operating Income / Revenue

That is, the ratio of operating profit to revenue. In other words, return on sales (ROS) - how much cash from the volume of products sold is the company's profit.

Hello! Today we’ll talk about profitability, what it is and how to calculate it. aimed at making a profit. The correct operation and effectiveness of the management methods used can be assessed using certain parameters. One of the most optimal and informative is the profitability of the enterprise. For any entrepreneur, understanding this economic indicator is an opportunity to assess the correctness of resource consumption in the enterprise and adjust further actions in all directions.

Why calculate profitability

In many cases financial profitability the enterprise becomes key indicator analysis of the activities of a business project, which helps to understand how well the funds invested in it pay off. Correctly calculated indicators for several factors and items are used by the entrepreneur for pricing services or goods, for general analysis at the working stage. They are calculated as a percentage or used in the form of a numerical coefficient: the larger the number, the higher the profitability of the enterprise.

In addition, it is necessary to calculate enterprise profitability ratios in the following production situations:

• For forecast possible profit, which the company will be able to receive in the next period;
• For comparative analysis with competitors in the market;
• To justify large investment investments, helping a potential transaction participant determine the projected return on a future project;
• When determining the real market value companies during pre-sale preparation.

Calculation of indicators is often used when lending, obtaining loans or participating in joint projects, developing new types of products.

Enterprise profitability

Discarding scientific terminology, we can define the concept:

Enterprise profitability as one of the main economic indicators that well characterizes the profitability of an entrepreneur’s labor. Its calculation will help you understand how profitable the chosen project or direction is.

Many resources are used in the production or sales process:

• Labor (hired workers, personnel);
• Economic;
• Financial;
• Natural.

Their rational and correct operation should bring profit and constant income. For many enterprises, analysis of profitability indicators can become an assessment of operating efficiency for a certain (control) period of time.

In simple words, business profitability is the ratio between the costs of the production process and the resulting profit. If after a period (quarter or year) a business project has produced a profit, then it is called profitable and beneficial for the owner.

To carry out correct calculations and predict indicators in future activities, it is necessary to know and understand the factors that influence profitability to varying degrees. Experts divide them into exogenous and endogenous.

Among exogenous ones there are:

• Tax policy in the state;
• General sales market conditions;
• Geographical location of the enterprise;
• Level of competition in the market;
• Features of the political situation in the country.

In many situations, the profitability and profitability of an enterprise is influenced by its geographic location, proximity to sources of raw materials or consumer clients. The situation is having a huge impact on stock market and currency fluctuations.

Endogenous or internal production factors, which greatly affect profitability:

• Good working conditions for personnel of any level (which necessarily has a positive effect on product quality);
• Logistics efficiency and marketing policy firms;
• General financial and management policies of management.

Taking into account such subtleties helps an experienced economist make the level of profitability as accurate and realistic as possible.

Factor analysis of enterprise profitability

To determine the degree of influence of any factors on the level of profitability of the entire project, economists conduct special factor analysis. It helps determine the exact amount of income received under the influence internal factors, and is expressed by simple formulas:

Profitability = (Profit from sales of products / Cost of production) * 100%

Profitability = ((Product price - Product cost) / Product cost)) * 100%

Usually when such financial analysis use his three-factor or five-factor model. Quantity refers to the number of factors used in the counting process:

• For the three-factor factor, the profitability of manufactured products, the indicator of capital intensity and turnover of fixed assets are taken;
• For the five-factor it is necessary to take into account labor and material intensity, depreciation, and turnover of all types of capital.

Factor calculation is based on the division of all formulas and indicators into quantitative and qualitative, which help to study the development of the company from different angles. It shows a certain relationship: the higher the profit and capital productivity from production assets enterprise, the higher its profitability. It shows the manager the relationship between standards and business results.

Types of profitability

In various production areas or types of business, specific indicators of enterprise profitability are used. Economists identify three significant groups that are used almost everywhere:

1. Profitability of products or services: the basis is the ratio of the net profit received from the project (or direction in production) and the costs spent on it. It can be calculated both for the whole enterprise and for one specific product;
2. Profitability of the entire enterprise: this group includes many indicators that help characterize the entire enterprise as a whole. It is used to analyze a working project by potential investors or owners;
3. Return on assets: a fairly large group of various indicators that show the entrepreneur the feasibility and completeness of using a certain resource. They allow you to determine the rationality of using loans, your own financial investments or other important assets.

Analysis of the profitability of an enterprise should be carried out not only for internal needs: it important stage before major investment projects. It may be requested when providing a loan, or it may become the starting point for enlarging or reducing production.

A real complete picture of the state of affairs at an enterprise can be obtained by calculating and analyzing several indicators. This will allow you to see the situation from different angles and understand the reason for the decrease (or increase) in expenses for any items. To do this, you may need several coefficients, each of which will reflect a specific resource:

1. ROA – return on assets;
2. ROM – level of product profitability;
3. ROS – return on sales;
4. ROFA – return on fixed assets;
5. ROL – personnel profitability;
6. ROIC – return on investment in an enterprise;
7. ROE – return on equity.

These are just a small number of the most common odds. To calculate them, the numbers from open sources– balance sheet and its annexes, current sales reports. If an estimated assessment of the profitability of a business for launch is needed, data is taken from marketing analysis market for similar products or services available in general overview competitors' reports.

Calculation of enterprise profitability

The largest and most general indicator is the level of profitability of the enterprise. To calculate it, only accounting and statistical documentation for a certain period is used. In a more simplified version, the formula for enterprise profitability looks like this:

P= BP/SA*100%

• P is the main profitability of the enterprise;
• BP is an indicator of balance sheet profit. It is equal to the difference between revenue received and cost (including organizational and management costs), but before taxes are subtracted;
• SA – total cost all negotiable and non-current assets, production capacity and resources. It is taken from the balance sheet and its annexes.

The calculation will require the average annual cost of all tangible assets, the depreciation of which is used in the formation selling price for services or goods.

If the assessment of the enterprise's profitability is low, then certain management measures should be taken to improve the situation. It may be necessary to adjust production costs, reconsider management methods or rationalize the use of resources.

How to calculate return on assets

A complete analysis of an enterprise's profitability indicators is impossible without calculating the efficiency of using various assets. This is the next important stage, which helps to assess how fully all assets are used and understand their impact on profit. When assessing this indicator, pay attention to its level. A low value indicates that capital and other assets are not performing sufficiently, while a high value confirms the correct management tactics.

In practice, the return on assets (ROA) indicator for an economist means the amount of money that falls on one unit of assets. In simple words, it shows the financial return of a business project. Calculation for all types of assets must be carried out regularly. This will help in a timely manner to identify an object that does not bring return or benefit in order to sell it, lease it or modernize it.

In economic sources, the formula for calculating return on assets looks like:

• P – profit for the entire analyzed period;
• A is the average value by type of asset for the same time.

This coefficient is one of the three most revealing and informative for a manager. Getting value less than zero indicates that the enterprise is operating at a loss.

Return on fixed assets

When calculating assets, the profitability ratio of fixed assets is separately identified. These include various means of labor that are directly or indirectly involved in production process without changing the original form. The period of their use must exceed a year, and the amount of depreciation is included in the cost of services or products. Such basic means include:

• Any buildings and structures in which workshops, offices, laboratories or warehouses are located;
• Equipment;
• Heavy duty vehicles and loaders;
• Office and work furniture;
• Passenger cars and passenger transport;
• Expensive tool.

Calculating the profitability of fixed assets will show managers how effective the economic activity of a business project is and is determined by the formula:

R = (PR/OS) * 100%

• PE – net profit for a certain period;
• OS – cost of fixed assets.

This economic indicator is very important for commercial manufacturing enterprises. It gives an idea of ​​the share of profit that falls on one ruble of invested fixed assets.

The coefficient directly depends on profitability and should not be less than zero: this means that the company is operating at losses and is using its fixed assets irrationally.

Profitability of products sold

This indicator is no less important for determining the level of profitability and success of the company. In international economic practice, it is designated as ROM and is calculated using the formula:

ROM=Net profit/cost

The resulting coefficient helps determine the efficiency of sales of manufactured products. In fact, this is the ratio of sales income and costs of its production, packaging and sale. For an economist, the indicator clearly demonstrates how much each ruble spent will bring in percentage terms.

The algorithm for calculating the profitability indicator may be more understandable for beginners products sold:

1. The period in which it is necessary to analyze the indicator is determined (from a month to a whole year);
2. The total amount of profit from sales is calculated by adding up all income from the sale of services, products or goods;
3. Net profit is determined (according to the balance sheet);
4. The indicator is calculated using the above formula.

A good analysis will include a comparison of profitability of products sold over several periods. This will help determine the decline or increase in the company’s income over time. In any case, you can conduct a more in-depth review of each supplier, group of products or assortment, and work through the customer base.

Return on sales

Margin or return on sales is another important consideration when pricing a product or service. It shows what percentage of total revenue comes from the company's profit.

There is a formula that helps calculate this type of indicator:

ROS= (Profit / Revenue) x 100%

As a basis for calculation, can be used different types profit. Values ​​are specific and vary depending on the product range, company activity and other factors.

Sometimes experts call return on sales the rate of profitability. This is due to the ability to show the share of profit in total sales revenue. It is also calculated over time to track changes over several periods.

IN short term a more interesting picture can be given by operating profitability of sales, which can be easily calculated using the formula:

Operating return on sales = (Profit before tax / Revenue) x 100%

All indicators for calculations in this formula are taken from the “Profit and Loss Statement”, which is attached to balance sheet. The new indicator helps the entrepreneur understand what real share of revenue is contained in each monetary unit of his revenue after paying all taxes and fees.

Such indicators can be calculated for a small enterprise, one department or an entire industry, depending on the task at hand. The higher the value of this economic coefficient, the better the enterprise performs and the more profit its owner receives.

This is one of the most informative indicators that helps determine how profitable a business project is. Without calculating it, it is impossible to draw up a business plan, track costs over time, or assess the profitability of the enterprise as a whole. It can be calculated using the formula:

R=VP/V, Where:

• VP – gross profit (calculated as the difference between the revenue received from the sale of goods or services and the cost);
• B – proceeds from sale.

The formula often uses a net profit indicator, which better reflects the state of affairs at the enterprise. The amount can be taken from the balance sheet appendix.

Net profit no longer includes income tax, various selling and overhead expenses. It includes current operating costs, various penalties and paid loans. To determine it, the total revenue that was received from the sale of services or goods (including discounts) is calculated. All expenses of the enterprise are deducted from it.

It is necessary to carefully select the time period depending on the task of financial analysis. To determine the results of internal control, the calculation of profitability is carried out over time regularly (monthly or quarterly). If the goal is to obtain an investment or loan, a longer period is taken for comparison.

Obtaining the profitability ratio provides a lot of information for the management personnel of the enterprise:

• Shows the correspondence between actual and planned results, helps evaluate business performance;
• Allows you to conduct comparative analysis with the results of other competing companies in the market.

If the indicator is low, the entrepreneur needs to think about improving it. This can be achieved by increasing the amount of revenue received. An alternative is to increase sales, raise prices slightly, or optimize costs. You should start with small innovations, observing the dynamics of changes in the coefficient.

Personnel profitability

One interesting relative indicator is personnel profitability. Almost all enterprises, regardless of their form of ownership, have long taken into account the importance effective management labor resources. They influence all areas of production. To do this, it is necessary to monitor the number of personnel, their level of training and skill, and improve the qualifications of individual employees.

The profitability of personnel can be determined using the formula:

• PE – net profit of the enterprise for a certain period of time;
• CH – number of employees at different levels.

In addition to this formula, experienced economists use more informative ones:

1. Calculate the ratio of all personnel costs to net profit;
2. The personal profitability of one employee, which is determined by dividing the costs associated with him by the share of profit brought to the enterprise budget.

Such a complete and detailed calculation will help determine labor productivity. Based on it, you can carry out a kind of diagnostics of jobs that may be reduced or need to be expanded.

Do not forget that the profitability of personnel may be affected by low-quality or old equipment, its downtime or other factors. This can reduce performance and incur additional costs.

One of the unpleasant, but sometimes necessary methods is often reducing the number of employees. Economists must calculate the profitability for each type of personnel in order to highlight the weakest and most vulnerable areas.

For small enterprises, regular calculation of this coefficient is necessary in order to adjust and optimize their expenses. With a small team, it is easier to carry out calculations, so the result can be more complete and accurate.

Profitability threshold

For many trade and manufacturing enterprises great value has a calculation of the profitability threshold. It means the minimum volume of sales (or sales finished products), in which the revenue received will cover all costs of production and delivery to the consumer, but without taking into account profit. In fact, the profitability threshold helps the entrepreneur determine the number of sales at which the enterprise will operate without losses (but will not make a profit).

In many economic sources, this important indicator can be found under the name “break-even point” or “critical point”. It means that the enterprise will receive income only if it overcomes this threshold and increases the coefficient. It is necessary to sell goods in quantities that exceed the volume obtained according to the formula:

• PR – threshold (norm) of profitability;
• PZ – fixed costs for sales and production;
• Kvm – gross margin coefficient.

The last indicator is pre-calculated using the formula:

Kvm=(V – Zpr)*100%

• B – enterprise revenue;
• Zpr – the sum of all variable costs.

The main factors influencing the profitability threshold ratio:

• Product price per unit;
• Variable and fixed costs at all stages of production and sale of this product (service).

At the slightest fluctuation in the values ​​of these economic factors the value of the indicator also changes up or down. Of particular importance is the analysis of all expenses, which economists divide into fixed and variable. The first include:

• Depreciation for fixed assets and equipment;
• Rent;
• All utility costs and payments;
• Salaries of enterprise management employees;
• Administrative costs for their maintenance.

They are easier to analyze and control, and can be monitored over time. Variable costs become more “unpredictable”:

• Wages of the entire workforce of the enterprise;
• Fees for servicing accounts, loans or transfers;
• Costs for the purchase of raw materials and components (especially when exchange rates fluctuate);
• Payment for energy resources spent on production;
• Transport costs.

If a company wants to remain consistently profitable, its management must control the rate of profitability and analyze expenses for all items.

Any enterprise strives to develop and increase capacity, open new areas of activity. Investment projects also need detailed analysis, which helps determine their effectiveness and adjust investments. In domestic practice, several basic calculation methods are more often used, giving an idea of ​​what the profitability of a project is:

1. Methodology for calculating net present value: it helps determine the net profit from a new project;
2. Methodology for calculating the profitability index: necessary to generate income per unit of cost;
3. Method for calculating marginal efficiency of capital (internal rate of return). It is used to determine the maximum possible level of capital expenditure in new project. The internal rate of return is most often calculated using the formula:

VNR= ( net worth current/amount of initial investment current)*100%

Most often, such calculations are used by economists for certain purposes:

• If necessary, determine the level of expenses in the case of developing a project using raised funds, loans or credits;
• To demonstrate cost-effectiveness and document the benefits of the project.

If there are bank loans, calculation internal norm profitability will give the maximum allowable interest rate. Its excess in real work will mean that the new venture or direction will be unprofitable.

1. Methodology for calculating the return on investment;
2. A more accurate modified method for calculating the internal rate of return, for the calculation of which the weighted average cost of the advanced capital or investment is taken;
3. An accounting rate of return technique that is used for short-term projects. In this case, profitability will be calculated using the formula:

RP=(PE + depreciation/amount of investment in the project) * 100%

PE – net profit from a new business project.

Full payment in different ways is done not only before developing a business plan, but also during the operation of the facility. This is a necessary set of formulas that owners and potential investors use when trying to assess the possible benefits.

Ways to increase enterprise profitability

Sometimes the analysis produces results that require serious management decisions. To determine how to increase profitability, it is necessary to understand the reasons for its fluctuations. To do this, the indicator for the reporting and previous periods is studied. Typically, the base year is the past year or quarter in which there was high and stable revenue. What follows is a comparison of the two coefficients over time.

The profitability indicator may be affected by changes in selling prices or production costs, increases in costs or the cost of raw materials from suppliers. Therefore, it is necessary to pay attention to factors such as seasonal fluctuations in the demand of product buyers, activity, breakdowns or downtime. When solving the problem of how to increase profitability and, it is necessary to use various ways profit increase:

1. Improve the quality of products or services and their packaging. This can be achieved by modernizing and re-equipping its production facilities. This may require serious investments at first, but in the future it will more than pay off in resource savings, a reduction in the amount of raw materials, or a more affordable price for the consumer. You can consider the option;
2. Improve the properties of your products, which will help attract new consumers and become a more competitive company in the market;
3. Develop a new active marketing policy for your business project, attract good management personnel. Large enterprises often contain an entire marketing department that deals with market analysis, new promotions and searching for a profitable niche;.
4. Various ways to reduce costs in order to compete with a similar range. This should not come at the expense of the quality of the product!

The manager needs to find a certain balance among all methods in order to achieve sustainable positive result and maintain the enterprise’s profitability indicators at the proper level.

It is important to differentiate the profitability indicator from revenue. If revenue simply reflects the total turnover of the company (it is calculated in rubles), then profitability is the efficiency of its activities (expressed in %). Any business that has brought profit at the end of the period under review can be called profitable. If a loss is made, the profitability will be negative.

IN trading activities Product profitability is calculated as the ratio of net profit to cost.

Profitability of goods (services) = net profit from sales (provision of services) / cost * 100%.
Return on sales (services) = net profit/revenue*100%.

Let's say the company is engaged in sales women's clothing. She purchased goods worth 12 million rubles and sold them for 28 million rubles. At the same time, administrative and commercial expenses amounted to 5 million rubles. Thus, the profit amounted to 11 million rubles, and the profitability of goods was 11/12*100=91%.
The profitability of services is calculated in a similar way; in this case, the cost does not take into account the purchase price of the goods, but, for example, the costs of purchasing tools, paying workers, etc.

The assessment takes into account the company's net profit and turnover. If we take c as a basis, then it will be equal to = 11/28*100%= 39.2%. Using this formula, it is advisable to evaluate each product group separately. For example, the profitability of sales of T-shirts, bags, etc. This will allow you to highlight the most effective positions, as well as those that need to be worked on to improve their profitability.

Acceptable level of profitability by industry

There is no single acceptable level of profitability; it varies depending on the industry. So, for example, in the mining industry, the return on sales is considered normal above 50%, but in the woodworking industry it does not reach 1%.
According to researchers, the average Russian profitability rate is about 12%. However, this value in itself is practically meaningless unless it is compared with similar performance indicators of competitors or industry averages.

Please note that if the profitability of your business deviates significantly from the industry average (by 10%), this increases the likelihood of a tax audit.

According to RIA rating, average sales by industry in 2013 were as follows:
- mining - 26.3%;
- chemical production - 18.3%;
- textile production - 2.8%;
- agriculture - 11.7%;
- construction - 6.7%;
- wholesale and retail trade - 8.2%;
- financial activities- 0.4% (2012, Rosstat);
- healthcare - 6.5% (2012, Rosstat).
In the service sector, a profitability of 15-20% is considered acceptable.

If you have come to the conclusion that you are seriously behind your competitors in terms of business efficiency, you need to work on improving your profitability. This goal can be achieved through a competent marketing policy aimed at increasing client base and ensuring an increase in the turnover of goods, as well as by obtaining more advantageous offers from goods suppliers (or subcontractors).

Return on sales can say what the organization’s activities in selling its products are: profitable or unprofitable.

The concept of return on sales (RP or ROM)

• RP– an indicator reflecting the ability of the organization’s managers to control all kinds of costs. This indicator is expressed as a percentage of income and revenue.
• RP coefficient– shows what part of the profit falls on one earned conventional unit.

Let's assume that financial efficiency enterprises are almost the same. Enterprises with the shortest production cycle will have a lower return on sales than enterprises with a long-term cycle.

• If the RP is less than zero, then we can conclude that the enterprise is operating at a loss, since in this case the cost exceeds the revenue.
• Zero profitability is a sign that the organization spends exactly the same amount on production as it acquires after sale.
• A positive return on sales means that the project is profitable. The higher the indicator, the better for the enterprise.

It is clear that the profitability indicator is very dependent on the field of activity of the enterprise. For example, in banking this figure can reach 100%, and in heavy industry – even 3%.

Increased profitability of sales

An increase in RP is undoubtedly a positive factor for any company.

You can talk about increasing profitability if:

• The analysis revealed that the growth rate of income is greater than the growth rate of costs.

This could be affected by the following:

• Sales volume has increased.
• The range of products produced has changed.

With an increase in demand for goods from buyers, an increase in the number of products sold is later observed. Consequently, due to the work of the production lever, income grows faster than costs. The company's management is able to achieve revenue growth by raising prices for a certain product or completely reducing its range.

• The analysis revealed that the rate of decline in income is much less than the rate of decline in costs.

This can usually result from:

• raising prices for manufactured products;
• making changes to the structure of the sales range.

These events are considered not entirely positive for the enterprise, and management must be aware of this. After all, profitability indicators look better, but the amount of income decreases.

Revenue growth and cost reduction. This is achieved if:

• changes were made in the sales range;
• cost levels were changed;
• prices increased.

This situation is undoubtedly positive for the organization.

Its reduction

We can talk about reducing RP in the following cases.

Cost growth rate is greater than revenue growth rate

This may be due to the following reasons:

• price reduction;
• changes in the direction of increasing cost levels;
• changes in the structure of the product range.

This situation is not a positive trend. To improve the situation, it is important to think about the organization's pricing as well as how costs are controlled.

The rate of revenue decline is faster than the rate of cost reduction

This situation usually occurs for only one reason:

• Decrease in sales volumes. It is quite normal if an organization, for one reason or another, decides to reduce its production in a certain market. Costs fall much more slowly than revenues due to production leverage.

Increased costs and decreased revenue

Reasons that could influence this fact:

• prices were reduced;
• it was decided to make changes to the structure of the product range;
• cost standards have been increased.

In this situation, it is also advisable to analyze the formation of prices at the enterprise and pay attention to cost control.

Note: If the market is stable, then income, as a rule, changes faster than costs only under the influence of the production lever.

Formula

In fact, RP is easy to calculate using numbers that you already know. To do this, you will need to select the appropriate formula from the three listed below and substitute your values. If you do not have specific numbers, you can always find them in the balance sheet.

Calculation of the formula for return on sales

IN general view the RP formula looks like as follows:

RP = profit (loss) from sales / sales revenue * 100%

However, it is also common to calculate gross, operating and net RP. All calculation methods will differ in the numerator, but the denominator always remains the same.

Formula 1: calculation of gross RP

RP = gross profit: sales revenue * 100%

This indicator reflects the share of profit in each monetary unit earned by the enterprise.

Formula 2: calculation of operating profitability (return on sales based on EBIT)

RP = profit (loss) from taxation: sales revenue * 100%

The indicator reflects the share of profit from sales before taxes and interest in each monetary unit earned by the enterprise.

Balance formula

According to the new balance sheet form, the above formulas for return on sales will look like this:

General formula:

RP = p.2200: p.2110 * 100%,

Formula 1:

RP = p.2100: p.2110 * 100%,

Formula 2:

RP = p.2300: p.2110 * 100%,

Formula 3:

RP = p.2400: p.2110 * 100%.

According to the old balance sheet form, these same formulas look different:

General formula:

RP = p.050: p.010 * 100%,

Formula 1:

RP = p.029: p.010 * 100%,

Formula 2:

RP = p.140: p.010 * 100%,

Formula 3:

RP = p.190: p.010 * 100%,

where: RP – return on sales;

Important! The current (new) reporting form was approved by Order of the Ministry of Finance of the Russian Federation dated July 2, 2010 No. 66n.

Note: From 01/01/2013, the profit and loss statement is called the financial performance statement.

RP coefficient and its formula

As mentioned above, the profitability ratio reflects the share of the organization’s profit attributable to each conventional unit of earnings. This, in general, is profitability. The coefficient is calculated using the formulas already presented, but not in percentage terms.

How should you calculate the return on sales ratio:

K RP = profit (loss) from sales / sales revenue

The mentioned coefficient can also be calculated using the balance. It is also possible to calculate it not only in general, but also for each individual product or service. This makes sense if you need to analyze economic activity any enterprise.

How to interpret the calculated values

For example, the calculated profitability of RP is 25%. This means that for every 100 monetary units of the enterprise, there are 25 units of profit. You can also explain the answer as follows: for every ruble there are 25 kopecks of profit.

Note: By calculating the profitability ratio, we get facts. But having received a specific value, we will never be able to say: this or that investment of capital is profitable or not. For these purposes, for example, asset indicators are calculated.

Calculation example

Sales revenue of the enterprise OJSC "Ivolga" for 2013 amounted to 10 million rubles, and in 2014 it increased to 12 million. Operating profit (before tax) in 2013 was 3 million rubles, and in 2014 it increased to 3 .8 million. How has the operating RP changed?

Solution:

Let's calculate the operating profitability of sales in 2013:

RP 2013 = 3 million/10 million * 100% = 30%.

Let's calculate the same figure for 2014:

RP 2014 = 3.8 million/12 million * 100% = 31.7%.

Let's calculate the change in profitability of sales:

∆ RP = 31.7% – 30% = 1.7%.

Conclusion: In 2014, sales profitability before tax increased by 1.7%, which is undoubtedly a positive trend for the Ivolga OJSC enterprise.

Comment: The return on sales ratio is calculated based on the indicators of the reporting year. Accordingly, it cannot reflect the planned effect of long-term capital investments.

There is nothing more important for a company's management than maximizing revenue. In this regard, it is recommended to periodically carry out calculations and analyze the profitability of sales, and then compare the indicators with previous periods, identify significant factors and draw meaningful conclusions for the future.