If you are engaged in search of investors for development of own enterprise, then for certain already faced need of the work of a set of calculations among which the key position is taken by profitability which displays success and reliability of firm. How to calculate profitability of business, we also will consider on article course and also we will deal with economic semantic loading of an indicator and its practical value.
How to calculate profitability of business?
The considered concept is coefficient which turns out by division of profit of the enterprise into the sum of expenses. Unit of measure are percent. Calculation of profitability of business allows to understand, how effectively the company disposes of the resources, roughly speaking, the indicator shows how many profit each spent ruble makes.
How it is possible to calculate profitability of the available business? For this purpose it will be required to find out the relation of balance profit (P)) to the sum of average cost of the fixed business assets (FBA) and the capital assets (CA) of the enterprise, the received private is transferred to percent. If to designate profitability by letter P, profit – P, and fixed assets and current assets as OPF and OA, then it is possible to write down the following formula of calculation:
Р = (П / (OPF+OA))*100
For correct calculation of the current profitability of business it is necessary to give explanations for each size participating in calculation. Balance profit call the revenue sum which remained after subtraction of management and business expenses and product cost. In other words, it is profit before taxation which the firm got as a result for the reporting period. Also this figure has to consider the sums received from implementation of non-operating activity.
Data on the cost of OA and OPF are located in form No. 1 of the balance sheet in a total line of the second section and the column Fixed assets respectively.
It should be noted that it is possible both to estimate profitability of all business, and to calculate this indicator for the best understanding of work of equity, assets, activities and investments, having got, thus, the differentiated idea of overall performance of the enterprise. Also having information on profitability of firm, it is possible to plan competently its subsequent development, to estimate need of attraction of borrowed funds, reorganization of work of separate services, etc. Besides, this indicator is interesting to investors, business with high profitability will be more attractive to investments, even in case of presence of the second candidate for investments with higher profit, but low profitability.