"You can't manage what you can't value"
/IN. Hewlett, founder of Hewlett Packard/

Business is an activity that results in effectiveness and efficiency.

Efficiency– achieving goals in the external environment, obtaining market, financial, social results. Expressed in revenue, income, satisfaction of needs, material benefit and moral benefit.

Efficiency– profit generation, capital growth, increase in net cash flow.

Effectiveness is achieved in the external environment in the direction of factors: consumer - product - market (PTR), relying on the capabilities of the internal environment.

The capabilities of the internal environment are determined by three key factors (KPT):

Processes.

Resources.

Efficiency is achieved through the rationality of activities in the internal environment.

To make the right decisions and translate them into the right actions, to manage activities while optimizing effectiveness and efficiency, measurement and evaluation of capabilities are necessary. A parameter for such measurements can be business potential.

Business potential is an assessment of the ability to generate income and profit, a tool for measuring and assessing the effectiveness and efficiency of activities.

Performance Potential = Quantity of Products x Selling Price

Efficiency potential = Efficiency potential - Cost

Activity utility coefficient = Actual potential / Planned potential

The activity consists of three main stages:

1. Setting goals, developing strategy and tactics.

2. Operational decisions and actions to implement strategy through tactics.

3. Obtaining actual performance results.

Therefore, the three dimensions of potential are:

Strategic potential is the planned result of strategy implementation;

Operational, economic potential - current, created potential for the implementation of the strategy;

Actual potential is the practically obtained result from the implementation of the strategy and economic potential.

Strategic potential – what opportunities we expect to create and how to implement them in the long term. Assessment of desires in the external environment. It serves as the basis for the formation of economic potential, that is, the design of the internal environment.

Economic potential – what opportunities have been created at a given time. Assessing the capabilities of the internal environment to realize strategic potential. Serves as the basis for obtaining practical results.

Actual potential – what has been achieved by realizing the economic potential in pursuit of the strategic. Assessment of the implementation of goals in the external environment (PTE) and the capabilities of the internal environment (PRT). Serves to adjust strategic potential, changes in economic potential, to improve efficiency and effectiveness.

The application of the methodology of the potential approach in management is based on the schematization and formulation of activities.

A diagram of a business through a potential approach is presented in the figure:

Formulation consists of analysis, structuring of activities, establishing cause and effect relationships, factors, indicators, indicators that determine the result and effect and presenting them in the form of formulas.

Cause and effect dependencies for business formulation:

The cause is the goals, the effect is the strategy.

The cause is strategy, the effect is processes, resources, labor.

The cause is processes, resources, labor, the effect is results and efficiency.

Business structure as activities:

Vision and goals.

Strategy. Tactics.

Business processes.

Resources.

Business objects (projections):

Consumer.

Processes.

Resources.

Productivity.

Efficiency.

Based on the vision and goals in the directions of business objects, develop a strategy and tactics of action.

Determine required processes and resources.

Relying on entrepreneurial abilities, carry out business processes through labor, combining resources into products.

Sell ​​products, get money (result and effect).

Invest in business development.

Effectiveness and efficiency are determined by the quality of decisions and actions. The quality of decisions is expressed in the created opportunities to produce results. The quality of actions is expressed in the use of opportunities (potential) - the actual result and effect.

So, business formulation is a measured representation of factor dependencies in achieving the effectiveness and efficiency of each business object, between objects of the external environment, objects of the internal environment and between environments. This allows us to more clearly and clearly understand dependencies when making decisions and taking actions, as well as to manage interactions, eliminate bottlenecks, and achieve a synergistic effect.

The practical value of using the potential assessment method is to, based on the measurement and assessment of business capabilities and their use, carry out:

Measuring and assessing business capabilities based on performance and efficiency factors and overall.

Compare achievements to opportunities, not just past achievements.

Optimization of planned effectiveness and efficiency in the directions of PTR and PPT projections based on factors and indicators: from strategic potential to economic potential, from economic potential to actual potential.

Identify reserves of actual effectiveness and efficiency to improve activities and optimize them.

Potential calculations.

All measurements are made on the basis of an information system: financial, tax, management accounting.

Practical mechanism for calculating potential:

1. Collection and processing of data into the necessary information.

2. Formulas and algorithms for calculating PTR, PRT indicators.

3. Analysis of factors for indicators, causes and effects.

4. Calculation of indicators and indicators.

5. Designing for future changes.

Measuring strategic capability.

Strategic potential is calculated from assessments of prospects (strategy, project business plan) in accordance with the vision of the external environment (demand - supply, market) and the capabilities of the internal environment (resources).

Quantitative potential (QP) - is measured and assessed depending on the characteristics of the type of activity, geography and other features, based on PTR indicators, based on marketing research, possible resources and represents a strategic assessment of the number of sales by time periods.

Example. Market segment – ​​1000 potential buyers, taking into account market estimates and opportunities, it is established that 10% coverage is realistic, that is, 100 buyers. Can be increased by the number of repeat purchases.

Cost potential (CPst) - is also measured based on the analysis of PTP indicators (consumer budget, cost of goods, competition) and represents an assessment of the quantitative potential in the average price (C) for the period.

PRst = PRk x C

The consumer is willing to pay - 1000 rubles, the cost of a unit of production is 700 rubles, competitive price adjustment is 800 rubles. from 1000 rubles, depending on market share (positions).

Taking into account a conservative approach, we take the price of 800 rubles.

100 x 800 = 80,000 rub. (80 thousand rubles)

Efficiency potential is measured by profit, that is, by comparing the cost potential and the estimated cost of the strategy.

PE = 80 – 70 = 10 t. Rub.

Return on sales = 10 / 80 = 12.5%

Measuring economic potential.

Economic potential is an assessment of the present, created opportunities for effectiveness and efficiency as of a certain date. Expresses the productive capacity of assets and regulatory efficiency based on capital expenditures incurred and operating costs.

Economic quantitative potential (PRqek) – production capacity. It is measured by the productivity of formed non-current assets, the possible attraction of current assets at the expense of existing liabilities, and labor productivity in services. Capacity indicators are compared with process and labor productivity estimates.

Example. PRkEk = 120 units.

Economic cost potential (PRstec) - measured in the cost of economic quantitative potential and standard profit (income on deposits, return on investment, other indicators).

Cost is calculated from variable (direct) and fixed (indirect) costs.

Other calculation methods are possible, including depending on the type of activity.

CC stack = 400 variable + 200 post = 600 x 1.15 (rate of profit) = 690, take 700 taking into account the market and strategy.

PRstack = 120 x 700 = 84 tons. Rub.

PE = 84 – 72 (120x600) = 12 tons. Rub.

Profitability = 12 / 84 = 14.3%

Actual potential.

Actual potential (results) is measured in the information system (financial, management accounting).

PRkf = 70 units PRstf = 70x900 (sales price) = 63 thousand rubles. PEF = 8.5 t. Rub. Profitability = 8.5 / 63 = 13.5%

The comprehensive use of an enterprise's potential can be assessed by comparing planned and actual results using activity efficiency ratios (CPI).

The role of efficiency at business stages:

Realization of strategic potential into economic potential.

Realization of strategic potential in actual results.

Use of economic potential in actual results.

Identification of deviations, establishment of causes based on factors, indicators, indicators.

Optimization of activities in the direction of increasing potential and its use.

Performance efficiency:

Income econ / Income strata

Actual income / Strata income

Income actual / Income economic

- (Income fact / Income economic) : (Income fact / Income strata)

The same applies to the quantity of goods and labor productivity.

Efficiency efficiency:

Profit econ (norm) / Profit strata

Profit fact / Profit strata

Profit fact / Profit economic

- (Profit actual / Profit economic) : (Profit actual / Profit strata)

Same for cash flow

Calculation of efficiency factors.

The utility coefficient of activity is measured by comparing actual results (potential) with strategic and economic potential.

Efficiency eq/str:

KPDk = 120 / 100 = 1.2 KPDst = 84 / 80 = 1.05 KPDe = 12 / 10 = 1.2 KPDr = 14.3 / 12.5 = 1.14

Economic potential is created above strategic potential. The validity of such decisions is analyzed according to factors, indicators, indicators of PTR, PRT.

F/page efficiency:

KPDk = 70 / 100 = 0.7 KPDst = 63 / 80 = 0.79 KPDe = 8.5 / 10 = 0.85 KPDr = 13.5 / 12.5 = 1.08

Actual results are below strategic potential, except for profitability. Factors, indicators, indicators of PTR, PRT are analyzed. The reasons for deviations are identified.

Efficiency f/econ:

KPDk = 70 / 120 = 0.58 KPDst = 63 / 84 = 0.75 KPDe = 8.5 / 12 = 0.71 KPDr = 13.5 / 14.3 = 0.94

Actual results are below economic potential. Factors, indicators, indicators of PTR, PRT are analyzed. The reasons for deviations are identified.

Based on deviations, the reasons for the successful or unsuccessful use of the enterprise’s potential are identified, activities are balanced in order to eliminate bottlenecks, adjustments are made to goals, strategies, tactics, and leaders are replaced in case of their failure.

Optimization of activities based on. From goals to achievements.

The first function of applying business potential is to optimize efficiency and effectiveness at the planning stage, that is, maximizing income and profit under certain conditions of the external environment and opportunities in creating an internal environment at the stages of development.

To manage effectiveness and efficiency, you need to understand the dependencies between external and internal environmental factors, measure and evaluate these dependencies. At the same time, evaluate not only and not so much fact by fact (past with past), but with possibilities, that is, the potential of activity. This gives a more objective assessment and allows you to manage the future, which has already arrived (P. Drucker).

To manage activities, you need not only to design a system for measuring and assessing potentials, but also to establish the factors that determine the potential, then express the factors in indicators, evaluate the indicators in digital values, that is, set indicators.

The system of indicators serves as the basis for managing activities (from top to bottom), which consists of planning, collecting and processing information, analysis, control, motivation in the organizational business system. The organizational system provides for: business process engineering, organizational structuring, selection and placement of personnel, a system of corporate standards, infrastructure, provision of resources (resource system).

The purpose of the indicator system in optimizing activities:

Based on the goals of the PTR, determine the strategic potential (combining desires in the external environment with an assessment of the possibilities for creating the internal environment). Evaluate by factors, indicators and indicators.

Guided by strategic potential, form the internal capabilities of the GoT - economic potential. Evaluate by factors, indicators and indicators.

Using the economic potential of the PRT in the direction of maximizing income and minimizing costs, obtain actual results. Evaluate by factors, indicators and indicators.

In this way, we optimize activities during the planning stage.

Optimization of activities based on measuring and assessing potential consists of:

1. In structuring activities - determining the factors of effectiveness and efficiency in the projections of PTR and PPT.

2. In establishing a system of indicators - dependencies in factors and between factors (as the result and effect depend on factors):

According to factors P, T, R and their interaction on performance,

According to factors P, R, T and their interaction on effectiveness and efficiency,

On the interaction of PTR and PPT factors on effectiveness and efficiency.

3. In assessing indicators using indicators (digital parameters of dependencies) in stages:

Strategic potential – development parameters in the external environment, taking into account the capabilities of the internal environment,

Economic potential - the formation of necessary and sufficient resources (assets - liabilities) to implement the strategy through tactics (organization and management of resources, processes, labor),

The actual use of economic potential by combining resources with labor in processes.

4. In comparing and assessing actual achievements with strategic aspirations and economic opportunities - determining the utility coefficients of activities. Analysis of deviations by cause and effect, identification of efficiency and effectiveness reserves, determination of activity adjustments.

5. In making changes to strategy and tactics. New optimization for the following periods.

Structuring of activities is carried out on the basis of strategy and tactics. For more information, see www.vsoldatov.com, articles “Tools for Business Efficiency and Efficiency.”

Stage 1 – strategic potential. Designing performance in the external environment.

Optimization of activities at the strategic planning stage is carried out through the development of a system of interrelated factors, indicators and indicators (hereinafter referred to as SFPI), which determine the achievement of strategic goals, taking into account the assessment of the parameters of the external environment and the possibilities for shaping the internal environment (investments).

Performance in the external environment is determined by decisions and actions:

v Establishing needs (requests), identifying consumers.

v Identification of a product that satisfies a need. Product positioning.

v Definition of the market: demand, market capacity, segmentation, supply of goods on the market, the ratio of supply and demand, competition, places and methods of selling goods, price estimates.

v Macroeconomic factors influencing business development.

v Microeconomic (industry) factors influencing business development.

v Developing a strategy to achieve goals:

Option 1 - from the possible volume (strategic potential) to the optimization of processes - resources - labor (economic potential and its actual use). Optimization of costs based on a given sales volume.

Option 2 – from PPT capabilities (economic potential) to maximizing sales volume (strategic potential). Maximizing sales from available resources.

v Market activity: product promotion, sales.

That is, performance in the external environment is ensured by the combination and interaction of factors along the projections: consumer – product – market, taking into account restrictions.

Business restrictions:

Consumer demand.

Competition in the market.

Resources.

Capital.

Government regulation.

External macroeconomic environment.

Key factors of performance in the external environment:

Availability of consumers (request to meet the needs of people and organizations).

Consumer demand.

Product that satisfies consumers. Consumer value of the product.

Supply of goods on the market.

The price of the product corresponds to the consumer’s request.

Market dimensions: geography, number of potential customers, segmentation and positioning in the market, elasticity of demand in physical units.

Market conditions: rise, decline, shortage, oversupply, level of competition. Demand and market development in the future.

Market position and market advantages over alternatives and competitors.

Conquering the market. Product promotion.

What you need to know about the external environment:

1. What about the consumer: who wants what, why and what he pays for, how many consumers, alternatives to the need and its satisfaction, where and how he wants to receive the product, at what price.

2. What about the product: form, content, properties and characteristics, quantity, quality, advantages, alternatives, life cycle, cost.

3. What about the market: place of purchase of goods, supply and demand, size and capacity of the market, market price of goods, communications with consumers, competition, advantages in the market.

PTR factors on the number of sales:

Demand is the market volume in terms of quantity and value. Demand segment.

The price of the offered product.

Offer and promotion of goods on the market.

PTR factors for price:

The relationship between supply and demand for a product. The quantity of goods offered on the market.

Offering a product that meets the consumer's request.

Market positions.

Market advantages in product, promotion, over competitors.

Macroeconomic factors influencing demand, supply, prices.

Microeconomic factors influencing demand, supply, prices.

Trademarks, brand.

Product cost.

Key indicators of effectiveness and efficiency of activities in the external environment:

1. Number of sales.

2. Average sales price.

3. Cost of sales - revenue.

4. Profitability of sales.

5. Market position. Market share, segment share.

6. Competitive advantages in terms of product, market, resources, production, sales.

7. Trademarks, brand.

8. Changes in SWOT analysis for the external environment.

9. Life cycle indicators.

10. Strategic potential.

Key indicators:

Number of sales.

Cost of sales – revenue.

Sales profitability.

Market share, segment share.

Strategic potential.

Let us remind you that:

Indicator - quantitative, qualitative and generalizing characteristics of the properties of an object on the part of the subject. The indicator acts as a methodological tool that provides the ability to test theoretical provisions (plan) with the help of empirical data (fact).

Indicator - measuring dependencies on results.

Therefore, not all indicators can be measured in indicators.

For more information about the content of projections, factors, indicators and indicators for projections of the external environment, see www.vsoldatov.com, articles “Business optimization based on assessment of potential and efficiency”, “Factors and indicators for optimizing business potential”.

Effectiveness and efficiency (growth of strategic potential) is ensured by a synthesis of decisions and actions aimed at projections of the external environment and is assessed by key indicators and indicators of the external environment.

Synthesis is the interaction between projections of the external environment and the internal environment.

The development of a system of factors, indicators and indicators of strategic potential has a long-term perspective, and is subsequently adjusted depending on significant, fundamental changes in the structure, content, scale, and results of the business.

Stage 2 – economic potential. Designing the effectiveness and efficiency of the internal environment.

The effectiveness and efficiency of a business (economic potential) is ensured in the internal environment, guided by the goals and changes in the external environment.

Synthesis of external and internal environment:

The internal environment must be oriented towards the external environment - proceed from it.

The internal environment must change in accordance with changes in the external environment. Anticipate changes.

The internal environment must create advantages in the external environment.

Economic potential is formed from resources in the form of assets at the expense of liabilities, based on strategic potential, SFPI.

Economic potential is the capacity of assets to produce and sell products of the required quality in quantitative and cost terms.

The power of assets must correspond to processes and labor, in turn, processes and labor should not reduce the productivity of resources, that is, the coupling and synthesis of driving forces is necessary.

This is achieved through:

1. Productivity and productivity: resources into product, product into money (internal factor turning into external factor).

2. Resource capabilities: the required quantity and quality of resources for a certain volume, productivity of means of production, unique competitive advantages (internal factor).

3. Processes - engineering.

4. Rational use of resources - leadership in terms of costs (internal factor).

When making decisions on the formation of economic potential, information from “today” and the future are taken into account.

Success in the internal environment is achieved by the correct choice of strategy and tactics (a set of organizational and management tools), combination and interaction of factors in the projections of the PPT.

Strategy - what we do.

Tactics - based on what we do.

Processes - how we do it.

Resources – what we use and what we use.

Labor – how we decide, act, organize and manage the synthesis of resources in processes.

The interaction of internal factors determines the success of achieving goals in the external environment. Processes direct labor, resources provide results, labor creates results and effects by connecting resources in processes.

Key factors of effectiveness and efficiency of activities in the internal environment:

Product production capacity.

Quantity, quality, cost of resources used.

Cost of resources by type and total (cost).

Competitive advantages of the internal environment.

Complexity, consistency, interaction of processes.

Connecting labor resources in business processes.

What you need to know about the internal environment:

1. What to know about processes: main types of actions for effectiveness, technology, execution rules, resource requirements, parameters (productivity, cost and others), interaction of processes, advantages.

2. What to know about resources: necessary and sufficient for processes and labor (quantity, quality), productivity, cost, sources of receipt and financing, control of availability, benefits.

3. What to know about work: focus, who, what, when, on the basis of what, how to make decisions and carry out actions, which ensures the correctness and quality of decisions, coordination, consistency and balancing of activities, parameters of decisions and actions, how to ensure the implementation of decisions into results.

PRT factors per quantity:

Focus on PTR.

Process and resource performance.

Resource costs.

Availability of resources.

Quantity and quality of labor.

Cost of production.

PRT factors on price:

Focus on PTR.

Process and resource performance. Quantity of products.

Interaction of PRT factors.

Cost of production.

Key indicators effectiveness and efficiency of activities in the internal environment:

1. Production capacity by assets, processes. Quantity of products produced.

2. Product quality.

3. Product cost.

4. Unit cost of production.

5. Competitive advantages in terms of processes, resources, labor.

6. Level of processes to innovation. Level of resources and labor.

7. Labor productivity.

8. Revenue.

9. Profitability.

10. Changes in SWOT analysis for the internal environment.

Key indicators:

Productivity of non-current, production assets.

Productivity of production processes.

Labor productivity.

Labor productivity.

Labor efficiency.

Revenue.

Profitability.

Financial indicators.

Labor indicators.

Process indicators.

Economic potential and efficiency.

Comparison of indicator dynamics according to projections of the internal environment.

Synthesis of indicators in the internal environment:

Completeness and rationality of processes, process engineering, application of advanced technologies.

Resource approach. Resource management. See the article “Resource Management Model”.

Labor is the right decisions and actions aimed at achieving achievements in the external environment through productivity and the quality of combining resources in processes.

Consequently, optimization of activities at the stage of current planning consists in measuring economic potential and assessing it by factors, indicators, and indicators of the formation of the internal environment (IED), taking into account possible achievements in the external environment (IED).

For more information about the content of projections, factors, indicators and indicators for projections of the internal environment, see www.vsoldatov.com, articles “Business optimization based on assessment of potential and efficiency”, “Factors and indicators for optimizing business potential”.

The formation of economic potential occurs constantly in operational activities, so it is measured on a certain date, for a period - usually a year, distributed by quarters and months.

Economic potential is compared with strategic potential for the vision of realizing desires in the external environment, with the capabilities of the internal environment.

Stage 3 – actual potential. Realization of economic potential into actual results.

Optimization at the stage of realizing economic potential into actual results is carried out through the impact of labor on resources in processes through the production and sale of products, taking into account the calculation and assessment of indicators based on the SFPI, which determine the rational application and use of economic potential. Impacts are produced on personnel through management in the organizational system in the processes of marketing, development, production, and sales.

The realization of economic potential is a continuous process, therefore it is measured on a certain date, over a period: year, quarter, month.

Optimization of activities - maximizing income and minimizing costs in the external and internal environment, is put into practice through measuring, assessing and comparing potentials in the system of factors, indicators, indicators used at the stages of setting goals, planning and obtaining actual results.

Optimization of activities based on the potential approach consists of coordinated, balanced management of the organization in the external and internal environment: strategic potential into economic, economic into the most effective and efficient actual achievements.

The mutual influence of the media is carried out as follows:

We see and evaluate the prospects for activity in the external environment (strategic potential).

Based on strategic potential, we form the capabilities of the internal environment (economic potential).

We realize the possibilities of the internal environment in the external environment (actually realized potential).

The synthesis of factors, indicators and environmental indicators is embodied through measurement, assessment and comparison of activity potentials:

Correctly assess the vision of strategic potential through factors, indicators, indicators of individual projections of the PTR in the synthesis of general indicators of the external environment.

Correctly and rationally form the internal environment, economic potential through factors, indicators, indicators of individual projections of the Government of Tajikistan in the synthesis of general indicators of the internal environment.

By correctly influencing with labor the factors, indicators, indicators of individual projections of the PRT in the direction of the PTR factors, to realize the economic potential into actual achievements, focusing on the synthesis of general indicators of the external and internal environments.

Depending on the relationships in indicators and indicators, improve activities by adjusting indicators and potential indicators.

Synthesis indicators:

1. Dynamics of indicators, indicators of the external environment with the dynamics of indicators and indicators of the internal environment.

2. Changes in SWOT analysis.

3. Competitive advantages in PTR, PRT.

4. Dynamics of potentials and efficiency.

Synthesis indicators:

Sales revenue.

Sales in quantitative terms.

Profitability of activities.

Activity potentials and efficiency.

Optimization at the first stage is carried out by comparing economic and strategic potentials.

Values ​​of key indicators and indicators of economic potential for the year in comparison with strategic guidelines:

Key indicators	Economic values ​​for the year
	Production capacity
Revenue, rub.
Average product price, rub.
Profit, rub.
Profitability, %
	80 – (80 * 0,15) = 68
Market share, %

The essence of optimization:

Having assessed the possibilities for creating production capacity of 8 units for the planned year, based on the available capabilities, and guided by the desire to obtain a profitability of 15%, we find that the cost of production should be no more than 68 rubles. Based on this, we plan activities for the current year. In addition, you should invest in developing capacity to a strategic level if market conditions are expected to grow and direct efforts to gain a market share of up to 2%.

Optimization is implemented in the organization and management of activities.

Improvement of activities based on comparison of actual potential with strategic and economic potential

Identifying and using reserves to increase efficiency and effectiveness.

The second function of using business potential is to measure actual performance and efficiency with planned indicators (KPIs), based on deviations, determine their causes, and identify reserves. Adjust decisions and actions based on factors that increase efficiency and effectiveness, optimizing further activities.

By obtaining actual results (actual potential) during activities and comparing them with planned results: strategic and economic potentials, we will receive positive and negative deviations, that is, efficiency. By identifying the causes of deviations based on indicators and indicators, based on a system of potential indicators, we establish bottlenecks, problems in activities, and reserves for increasing efficiency and effectiveness. We express reserves in terms of indicators and measure them by growth indicators. We define changes in decisions and actions regarding strategic and economic potentials for them, and formalize changes in documents. By improving our activities in this way, we optimize them using a bottom-up method, that is, from the internal environment, from indicators to indicators and factors.

Technology for identifying efficiency and effectiveness reserves:

1. Determine efficiency by comparing potentials, indicators and indicators for the stage of strategy implementation.

2. Identify positive and negative deviations according to indicators in the projections of the PTR, PRT and between them.

3. Establish the factors (reasons) that caused the deviations.

4. Conduct factor analysis of information, identify reserves for increasing the values ​​of indicators.

5. Develop measures to eliminate weaknesses and develop strengths to optimize performance. Ensure the integration of activities according to the criteria of maximizing income and optimizing costs.

6. Measure and evaluate indicators and indicators of change.

7. Formalize changes in strategy and (or) current activities. Clarify the strategic and economic potential for the future period.

KPI analysis and development of changes are usually carried out based on the results of work for the year or quarter.

The specific set of metrics and indicators used depends on the specifics of a particular business and activity.

Ways to work with indicators:

Analysis of indicators.

Dynamics of indicators.

Comparability of indicators. Use of recognized algorithms.

Deviation with reasons.

Comparison with plan, fact, standards, market.

Improvement and changeability depending on strategy and tactics.

Levels of development and application of indicators (matryoshka principle):

Holding.

Company.

Subdivision.

Employee.

Analysis example. The example uses data from potential calculations.

Actual values ​​of key indicators and business indicators for the year in comparison with strategic targets:

Key indicators	Actual values ​​for the year	Strategic values ​​for the year
Quantity of products sold, units
Revenue, rub.
Average product price, rub.
Profit, rub.
Profitability, %
Market share, %
We do not take competitive advantages and other indicators to simplify the analysis.

From a comparison of indicators, we conclude that strategic targets have not been achieved. The analysis shows that the most significant deviations were made in revenue, quantity of products and profit. This could be due to both an overestimation of strategic prospects and insufficient efforts in the external environment. To improve activities:

1. It is necessary to check and clarify strategic estimates for future periods.

2. Analyze the causes of deviations in relation to environmental factors, both summative and for individual projections.

3. Determine the necessary measures, taking into account interaction with the internal environment. Focus on quantity and price of products.

4. Evaluate measures to increase indicators.

5. Include in plans for future periods.

Actual values ​​of key indicators and business indicators for the year in comparison with economic potential:

Key indicators	Actual values ​​for the year	Economic potential, annual values
Quantity of products sold, units
Revenue, rub.
Average product price, rub.
Cost of production, rub.
Profitability, %
Market share, %
We do not take competitive advantages and other indicators to simplify the analysis.

From a comparison of indicators, we conclude that economic targets have also not been achieved. The analysis shows that the capabilities of the internal environment were used better than in the external environment, capacity was used by 90%, and revenue was only 80%, production costs were fulfilled by 120%, and profit by 50%. To improve activities it is necessary:

1. Analyze the causes of deviations in relation to factors of the internal environment, both summative and for individual projections (see the above material).

2. Determine the necessary measures, taking into account interaction with the external environment. Emphasis on quantity and cost of production.

3. Evaluate measures to increase indicators.

4. Include in plans for future periods.

Improvement of activities should be aimed at increasing potential and increasing the effectiveness and efficiency of existing capabilities.

The complexity and labor intensity of using calculations of potentials and indicators is apparent, since the calculation system is actually an investment, one-time process, which subsequently requires only modernization in accordance with significant changes in activity. Calculations are made on the basis of financial and management accounting information and do not require significant costs for the implementation of individual information systems.

The main point, as P. Drucker wrote, is not the presence of indicators, the number of indicators, that is, data, but the choice of the right indicators, skill, the art of analyzing and synthesizing data into information necessary and useful (relevant) for decisions and actions. It is not enough to have an indicator panel, you need to use it correctly and skillfully for effectiveness and efficiency!

Introduction

Economic content of profitability………………………………….4
Concept and types of profitability………………………………………… …4
System of profitability indicators…………………………………….. 11

Enterprise profitability analysis…………………………………………………….16

2.1 Indicators of efficient use of property………………….16

Factor analysis of profitability……………………………………. .22

Profitability indicators of the OcOO "Intant Bishkek" enterprise………..26

3.1 General characteristics and financial condition of the enterprise……….....26

Analysis of enterprise profitability indicators……………………….29

3.3 Recommendations for increasing profitability…………………………..30

Conclusion

Bibliography

INTRODUCTION

To assess the effectiveness and economic feasibility of an enterprise’s activities, it is not enough to just determine absolute indicators. A more objective picture can be obtained using profitability indicators. Profitability indicators are relative characteristics of the financial results and efficiency of an enterprise. That is, profitability is a relative indicator of economic efficiency, comprehensively reflecting the degree of efficiency in the use of material, labor and monetary resources, as well as natural resources. The profitability ratio is calculated as the ratio of profit to the assets, resources or flows that form it. It can be expressed both in profit per unit of invested funds, and in the profit carried by each monetary unit received. Based on the analysis of average profitability levels, it is possible to determine which types of products and which business units provide greater profitability. This becomes especially important in modern market conditions, where the financial stability of an enterprise depends on the specialization and concentration of production.
The meaning of any entrepreneurial activity is to achieve a positive economic effect in the form of an absolute profit indicator or relative profitability. Thus, profitability is the main object and goal of financial management of enterprises. The more attention is paid to profitability, the more successfully the enterprise operates. In this regard, issues of scientific profitability management represent a pressing problem in the theory and practice of entrepreneurial activity.
The main goal of this course work is to analyze profitability as a concept of the efficiency of an enterprise, namely the efficiency of using all resources of a given enterprise. The main objectives are: 1) Explain the concept of profitability (including its types and system of indicators); 2) Analyze profitability (also taking into account the factors on which it depends); 3) Provide an analysis of profitability indicators (and recommendations for increasing them) using the example of a specific enterprise.

1. ECONOMIC CONTENT OF PROFITABILITY
1.1 CONCEPT AND TYPES OF PROFITABILITY

The results of the company's work are subject to evaluation for any reporting period. In this regard, based on accounting and reporting data, a system of various quantitative and qualitative indicators is calculated, designed to provide a comprehensive assessment of the company’s activities. Efficiency indicators provide an approximate assessment of the profitability of export and import operations. First, let's look at what profitability is.
One of its definitions is: profitability (from German rentabel - profitable, profitable), an indicator of the economic efficiency of production in enterprises. An enterprise that makes a profit is considered profitable. One more concept of profitability can be cited: profitability is an indicator representing the ratio of profit to the amount of production costs, monetary investments in organizing commercial operations, or the amount of property of the company used to organize its activities.
Profitability is divided as general - the percentage ratio of balance sheet (total) profit to the average annual total cost of production fixed assets and normalized working capital; and estimated profitability - the ratio of estimated profit to the average annual cost of those production assets from which payment for the assets is charged. An indicator of the level of profitability to current costs is also used - the ratio of profit to the cost of commercial or sold products.
Each enterprise independently carries out its production and economic activities on the principles of self-sufficiency and profitability. The enterprise has certain costs for the manufacture of products and their sale. These costs represent the production costs of a given enterprise (cost price), or individual costs. However, the costs of an individual product for enterprises may deviate from the average costs for the industry, which are taken as socially necessary costs or value, the monetary value of which is the price of the product. The presence of individual costs gives rise to the isolation of another part of the cost of production - profit, and, consequently, its relative measurement - profitability.
However, the absolute value of profit does not provide an idea of ​​the level and changes in the efficiency of production or trade. The amount of profit may increase, but production efficiency may remain the same or even decrease. This happens if the increase in profit is obtained due to extensive (quantitative) factors of production - an increase in the number of employees, an increase in the equipment fleet, etc. If, as the number of workers increases, their productivity remains the same or decreases, then production efficiency accordingly does not change or even decreases. The main distinctive features of profitability in the system of trade and industrial relations are the following:

the ratio of profit to production costs, characterizing the level of profitability of current costs (for the purchase of raw materials, materials, fuel, for depreciation of labor instruments, expenses for management and maintenance of production and wages of workers);
the ratio of profit to the average annual cost of production assets, characterizing the relative size of the increase in advance costs and giving an assessment of the economic efficiency of production assets.

The real meaning is given by the indicators of profitability, which characterize the efficiency of costs based on the profit received after implementation.
The distribution function of profitability 2 is specifically manifested in the fact that its value is one of the main criteria for the distribution of part of the surplus product - profit.
There are the following types of profitability of an enterprise: profitability of production, profitability of products and profitability of fixed production assets.
1. Profitability of production is the most generalizing, qualitative indicator of the economic efficiency of production, the efficiency of functioning of enterprises in the industry. The profitability of production precisely commensurates the amount of profit received with the size of those funds - fixed assets and working capital with the help of which it was obtained. These means used in production to obtain a certain profit are, as it were, its price. And the lower this price, i.e. the less funds required, with the same amount of profit received, the more efficient, of course, the production is, and the enterprise operates with greater efficiency. All of the above is true in the absence of a fixed profitability, approved in a number of regions to maintain a certain price level. Over time this should not happen.
Profitability of production in its most general form in industrial economics is defined as:

where P is profitability, %
P - amount of profit, som.
OF - cost of fixed assets, som.
OS - cost of working capital, som.
The period of operation of an enterprise can be different - a month, a quarter, a year, and therefore the cost of fixed assets and working capital is calculated at an average value. The profitability of production can generally be determined in any time range, during any period of target operation, in order to know the effectiveness of the production operations carried out. As a rule, with stable operation it is calculated per quarter and per year.
In industrial economics, a distinction is made between general and estimated production profitability. The overall profitability is almost identical to the previously determined profitability:

Profit is taken in the form of a total, balance sheet amount, and the cost of working capital was determined up to its standardized part, which is incorrect. It is necessary to take into account the entire used cost of working capital - own and borrowed.
Estimated profitability as an indicator of efficiency has lost its meaning and essentially does not have any practical significance. It can only characterize at what price and by what amount of funds the profit remaining at the disposal of the enterprise was obtained.
As can be seen from the general formula for production profitability

its growth factors will be:
1. Amount of profit
2. Cost and efficiency of use of fixed assets.
3. Cost and efficiency of use of working capital
The higher the profit, the lower the cost of fixed assets and working capital it is achieved and the more efficiently they are used, the higher the profitability of production, and therefore the higher the economic efficiency of the industry. And vice versa.
Thus, from the factors of production profitability, the main ways to increase it follow.
In industrial economics, the most general ways to increase production profitability include the following:
1. All ways that increase the amount of profit.
2. All ways to improve the efficiency of use of fixed assets.
3. All ways to improve the efficiency of using working capital.
In economic practice, many specific profitability indicators are used. They all play a certain role in the economy. However, for a sectoral economy, for a general view of economic processes, the indicators presented here are quite sufficient and correct.
2. Product profitability ratio shows how profitable the main activity of the enterprise is. Product profitability is calculated as the ratio of operating profit to the operating costs incurred in the manufacture of these products. In the case where it is necessary to take into account other components of the enterprise’s activity in addition to the main one, the ratio of net profit to total cost is used as a product profitability ratio. Formula for calculating product profitability:
2. Product profitability = product profit / product cost
In addition to the fact that the product profitability indicator also includes an indicator of the profitability of individual types of products, it is also interconnected with the profitability of sales of the enterprise.
To obtain the profitability of certain types of products, it is necessary to divide the profit received from the sale of a certain type of product by its cost. In addition to the cost price, the value of operating costs incurred in the manufacture (purchase) of a given product can be used. Formula for calculating profitability per unit of production:
2.1 Profitability per unit of production = profit from a given product / cost of the same product.
2.2 Profitability of sales of the enterprise- a coefficient that shows how much money or kopecks of profit falls on each unit of money of the enterprise. The return on sales ratio is the ratio of profit to revenue (net income).
Return on sales = profit / revenue from product sales

Profitability of fixed production assets show the efficiency of using fixed production assets (machines, equipment, etc.). The indicator is calculated as the ratio of the balance sheet profit (or net profit) of the enterprise to the cost of fixed production assets.

Profitability of fixed production assets = Profit / average annual value of all fixed production assets of the enterprise.
There is also profitability of fixed non-productive assets, that is, means not involved in the manufacture of products (buildings, transport, etc.). This indicator is calculated as the ratio of the balance sheet profit (or net profit) of the enterprise to the cost of fixed non-production assets.
3.1 Profitability of fixed non-productive assets = Profit / average annual value of all fixed non-productive assets of the enterprise.
To calculate both fixed production and non-production assets, the profitability formula for non-current assets is used (production + non-production + other non-current assets).
3.2 profitability of non-current assets = Profit / average annual value of all non-current assets
These three types of profitability comprehensively reflect the degree of efficiency in the use of material, labor and monetary resources, as well as natural resources.

1.2 PROFITABILITY INDICATOR SYSTEM

Profitability indicators characterize the financial results and efficiency of the enterprise. They measure the profitability of an enterprise from various positions and are grouped in accordance with the interests of participants in the economic process and market exchange.
Profitability indicators are important characteristics of the factor environment for generating enterprise profits. Therefore, they are mandatory when conducting a comparative analysis and assessing the financial condition of an enterprise. When analyzing production, profitability indicators are used as a tool for investment policy and pricing.
The main profitability indicators can be combined into the following groups
1) indicators of return on capital (assets),
2) product profitability indicators;
3) indicators calculated on the basis of cash flows 3.
First group profitability indicators are formed as the ratio of profit to various indicators of advanced funds, of which the most important are; all assets of the enterprise; investment capital (equity + investments + long-term liabilities); share (own) capital.

The discrepancy between the levels and profitability of these indicators characterizes the degree to which the enterprise uses financial levers to increase profitability: long-term loans and other borrowed funds,
These indicators are specific in that they meet the interests of all business participants of the enterprise. For example, the administration of an enterprise is interested in the return (profitability) of all assets (total capital); potential investors and creditors - return on invested capital; owners and founders - profitability of shares, etc.
Each of the listed indicators is easily modeled using factor dependencies. Let's consider the following obvious dependence.

This formula reveals the relationship between the profitability of all assets, profitability of sales and asset turnover. Economically, the connection lies in the fact that the formula directly indicates ways to increase profitability; when the return on sales is low, it is necessary to strive to accelerate asset turnover.
Let's consider another factor model of profitability.

As we can see, the return on equity (shareholder) capital depends on changes in the level of product profitability, the rate of turnover of total capital and the ratio of equity and debt capital. The study of such dependencies is of great importance for assessing the influence of various factors on profitability indicators. From the above relationship it follows that, other things being equal, the return on equity capital increases with an increase in the share of borrowed funds in the total capital.
Second group indicators are formed on the basis of calculating the levels and profitability of profit indicators reflected in the reporting of enterprises 4 . For example:

These indicators characterize the profitability of products of the base () and reporting () periods. For example, product profitability based on sales profit.
; ;
or
; ; ,
where - - profit from sales of the reporting and base periods;
- sales of products (works, services) of the reporting and base periods;
- cost of products (works, services) for the reporting and base periods;
- change in profitability in the reporting period compared to the base period.
The influence of the factor of change in sales volume is determined by calculation (using the method of chain substitutions)

Accordingly, the impact of a change in cost will be
The sum of factor deviations gives the overall change in profitability in the reporting period compared to the base period;

Third group profitability indicators are formed similarly to the first and second groups, however, instead of profit, net cash inflow is taken into account.

NPV - net cash inflow 5

These indicators give an idea of ​​the extent to which an enterprise can pay creditors, borrowers and shareholders with cash in connection with the use of existing cash inflows. The concept of profitability calculated on the basis of cash flow is widely used in countries with developed market economies. It is a priority because cash flow operations that ensure solvency are an essential sign of the state of the enterprise.

2. ANALYSIS OF ENTERPRISE PROFITABILITY
2.1 EFFICIENCY INDICATORS OF PROPERTY USE

Indicators of profitability and efficiency of use of property characterize the profitability of the enterprise, and are calculated as the ratio of the profit received to various types or cost items.
This is the most important group of indicators, since the results of their analysis will allow you to make decisions about investing your own funds in a particular business, characterizes the feasibility of the company’s activities, and is its resulting price.
Profitability of turnover (sales), characterizes the efficiency of the operational (production and economic) activities of the enterprise. It is designed to assess the profitability of production as a whole, but can also be used to compare the profitability of individual types of products. It is calculated as the ratio of operating income to gross revenue.
Rice. 1. Formation of sales profitability indicators.
The average level of return on sales varies depending on the industry and therefore does not have any standard. This indicator is important when comparing it with the corresponding indicators of similar enterprises, in dynamics or in comparison with planned indicators.
Return on equity- the most significant indicator in the activities of an enterprise, characterizing the efficiency of use of property owned by it. Based on this indicator, the owner of the assets can choose where to invest them. When calculating, it is not operating income that is taken into account, but the final, net profit, which will be distributed among the owners (shareholders) of the enterprise. It is calculated as the ratio of profit to the average annual cost of equity capital.
RSK = P/SK
Where: RSK - Return on equity
SK - equity capital, which in turn consists of the average annual value of the current assets and liabilities of the enterprise.
Therefore, to increase the efficiency of your investment, you can act in two main directions:
Increasing profits - increasing sales volumes and profitability of sales.
Reducing equity capital - effective management of current assets and liabilities, reducing the need for additional financing.
In general, to assess the feasibility of investing in a particular business, you should compare the projected return on equity capital with alternative options for allocating free resources (for example, a deposit), taking into account the risk factor.
In order to understand how and due to what the final return on equity indicator is formed, a number of intermediate indicators should be considered.
Return on net assets- an indicator of the efficiency of the enterprise's operating activities. It is calculated as the ratio of profit to the average annual net assets.
RFA = Profit / Net assets
where - Net assets = (non-current assets + current - current debt).
On the other hand, the return on net assets is formed due to their turnover and return on sales:
(Operating Profit / Sales Volume) * (Sales Volume / Net Assets) = (Operating Profit / Net Assets).
Return on net assets is used to assess the effectiveness of financial leverage.
Financial leverage 7 - The ratio of own and borrowed funds in the structure of net assets characterizes the impact of lending on the efficiency of the enterprise. The main criterion for assessing the effectiveness of financial leverage is the bank loan rate. If the lending rate is lower than the return on net assets, then an increase in the share of loans will increase the return on equity, and vice versa.
The value of financial leverage shows how much the return on equity will increase or decrease as the return on net assets increases or decreases.
Financial leverage is calculated using the following formula = Net assets / Equity
Using the above indicators, we can obtain the following formula:
Return on sales * Net asset turnover * Financial leverage = (Operating Income / Sales) * (Sales / Net Assets) * (Net Assets / Equity) = (Operating Income / Equity)
Now, to obtain the final return on equity formula, it is necessary to introduce an amendment so that net profit appears in the numerators.
(Operating income/Equity) * (((OD-I)*(I-T))/OD) = Return on equity
where, OD - operating income;
I - the amount of interest on loans;

T - income tax rate

This value differs from the previously obtained one, since it does not take into account some so-called irregular items of income and expenses from the income statement.
Rice. 2. Scheme for forming return on equity indicators.
The main factors that form private indicators and through them influence return on equity are
etc.................

Profitability is a relative indicator of profit that reflects the relationship of the effect obtained with the available or used resources.

A profitable state of activity is when, over a certain period, cash receipts compensate for expenses incurred, and profits are created and accumulated. The opposite condition is loss-making, when cash receipts do not compensate for expenses incurred.

Efficiency indicators characterize the ability of the costs incurred to pay off, which is the basis for the further activities of the enterprise. Profitability indicators reflect the results of an enterprise's activities more fully than profit; they are used as instruments of investment, pricing policy, etc.

Profitability of production is the most general, qualitative indicator of the economic efficiency of production, the efficiency of functioning of enterprises in the industry.

Profitability indicators - refer to relative indicators derived from profit that allow one to evaluate the effectiveness of invested funds; they are used in economic calculations and financial planning. Profitability indicators are calculated so that they can be compared with previous indicators.

They measure the efficiency of an enterprise as the ratio of profit to the absolute value of the factor that generates it - capital, turnover, revenue, costs.

There are a large number of profitability indicators that characterize the efficiency of an enterprise from various perspectives. These indicators can be grouped into 3 areas:

• product profitability;
• profitability of sales;
• return on capital.

Product profitability indicators (RP) measure the efficiency of production and sales of various types of final products of the company. There are the following approaches to calculating these indicators

, (7.10)

where Ped is profit in the structure of the price of a unit of production, rub.,

Sed – cost per unit of production, rub.

, (7.11)

where Prp is profit from sales of products (profit from sales), rub.;

CRP – total cost of products sold, rub.

Return on sales indicators are of particular importance in financial management for assessing the profitability of certain types of products. Depending on which profit indicator is in the numerator of the formula, the following indicators related to this group can be distinguished:

return on sales (Rprod)

(7.12)

net return on sales (PRprod)

,(7.13)

3. Return on capital indicators show how many rubles of profit the use of one ruble of capital brings. This group of indicators characterizes the relationship between profit and investment and is the most important in the system of profitability indicators for assessing the efficiency of an enterprise.

Return on equity indicators include:

return on capital (Рк)

, (7.14)

net return on equity (RRK)

,(7.15)

return on equity (Rsk)

.(7.16)

Net return on equity (NER) shows how many rubles of net profit are per ruble of own invested funds:

,(7.17)

where Pdon is profit before tax, thousand rubles;

K – average capital of the enterprise, thousand rubles;

SK – average value of the enterprise’s equity capital, thousand rubles.

Profitability of production (profitability of core activities) characterizes the efficiency of using fixed and working capital of an enterprise. This indicator is calculated using the formula:

, (7.18)

where Prp is profit from product sales, thousand rubles;

F – average annual cost of fixed assets, thousand rubles;

ObS – the average value of the enterprise’s working capital, excluding short-term financial investments, thousand rubles.

In industrial economics, the most general ways to increase production profitability include the following.

1. All ways that increase the amount of profit.

2. All ways to improve the efficiency of use of fixed assets.

3. All ways to improve the efficiency of using working capital.

The efficiency of an enterprise's economic activities and the economic feasibility of its operation are directly related to its profitability, which can be judged by the profitability or return on capital, resources or products of a business firm. Profitability is a relative indicator of the level of profitability of an enterprise; it characterizes the efficiency of the enterprise as a whole, the profitability of various areas of activity (production, commercial, investment, etc.).

Profitability, in contrast to profit, more fully reflects the final results of business, as it shows the ratio of the effect to cash or consumed resources. The indicator of the absolute amount of profit when analyzing the results of an enterprise’s activities cannot fully characterize whether it worked well or poorly, since the amount of work performed is unknown. Only the ratio of profit and the volume of work performed, characterized by the level of profitability, allows us to evaluate the production and economic activities of the enterprise in the reporting year, compare it with the results of the reporting periods, and also determine the place of the analyzed enterprise among other enterprises in the industry. Profitability indicators are used to evaluate the activities of an enterprise and as a tool in investment policy and pricing.

The profitability of an enterprise can be assessed using the following indicators.

1. Product profitability ( R np) - is calculated as the ratio of profit from product sales to the total cost of this product. The use of this indicator is most rational for on-farm analytical calculations, monitoring the profitability (unprofitability) of certain types of products, introducing new types of products into production and discontinuing ineffective products.

Product profitability is calculated using the formula

where P p is profit from sales of products, works, services, rubles; C p - total cost of products sold, rub.

Considering that profit is related to both the cost of the product and the price at which it is sold, product profitability can be calculated as the ratio of profit to the cost of products sold at free or regulated prices, i.e. to sales revenue. Therefore, the next profitability indicator is called return on sales.

2. Profitability of sales (turnover) - Rn:

where B is revenue from the sale of products, works, services.

This ratio shows how much profit accrues per unit of products sold. An increase in the indicator is evidence of either an increase in product prices at constant production costs of sold products, or a decrease in production costs at constant prices. Accordingly, a decrease in profitability of sales indicates an increase in production costs at constant product prices or a decrease in prices for sold products of the enterprise in question, i.e. about the fall in demand for it.

Indicators of product profitability and profitability of sales are interrelated and characterize changes in the current costs of production and sales of both all products and their individual types. In this regard, when planning the range of products, it is taken into account how the profitability of individual types will affect the profitability of all products. Therefore, it is very important to form the structure of manufactured products depending on changes in the specific gravity of products with greater or less profitability, in order to generally increase production efficiency and obtain additional opportunities to increase profits.

• 3. Return on capital indicators:
  • A) return on equity (R CK):

where P h - net profit; Ks is the average amount of equity capital.

This indicator characterizes the efficiency of using equity capital and shows how much profit accrues per unit of equity capital of the enterprise. A change in the values ​​of the return on equity ratio can be caused, for example, by a rise or fall in the quotations of the company's shares on the stock exchange, however, it should be borne in mind that the accounting price of the shares does not always correspond to their market price. Therefore, a high return on equity ratio does not necessarily indicate a high return on the capital invested in the enterprise;

• b) return on investment (permanent) capital
• (*„):

where K ik is the average amount of investment capital, which is equal to the sum of the average value of equity capital for the period and the average value of long-term loans and borrowings for the period.

The indicator characterizes the efficiency of using capital invested for a long time. The amount of investment capital is determined according to the balance sheet as the sum of equity and long-term liabilities;

V) return on total capital of the enterprise (R QK):

where B avg is the average net balance sheet total for the period.

This ratio shows the efficiency of using the entire capital of the enterprise, i.e. An increase in the value of the coefficient indicates an increase in the efficiency of use of the enterprise’s property and vice versa. A decrease in the profitability of the enterprise's total capital may also indicate a drop in demand for the enterprise's products or an overaccumulation of assets.

4. Return on current assets (R o6):

where JSC av is the average value of current assets, rub.

The average amount of capital and assets is determined according to the balance sheet as the arithmetic average of the results at the beginning and end of the period.

5. Profitability of fixed assets and other non-current assets ( R B):

where AB avg is the average value of fixed assets and other non-current assets for the period.

The profitability of fixed assets and other non-current assets reflects the efficiency of use of non-current assets, measured by the amount of profit per unit cost of funds. This ratio is interconnected with the profitability ratio of the entire capital of the enterprise. Thus, with a decrease in the profitability ratio of total capital, an increase in the profitability of fixed assets and other non-current assets indicates an excessive increase in mobile assets, which may be a consequence of the formation of excess inventories, overstocking of finished products in warehouses due to a drop in demand for them, an excessive increase in accounts receivable or cash funds.

Key profitability indicators

Table 10.1

	Explanations	A comment
/. Return on sales (Rn)
R=P p /V	B - sales revenue, P p - sales profit	Shows how much profit is made per unit of production. An increase in the coefficient is a consequence of rising prices at constant production costs or a decrease in production costs at constant prices
2. Return on total capital of the enterprise (R 0K)
*ok = P/B avg.	B avg - the average balance sheet total for the period P - can act as gross profit (P B) and as profit from sales	Shows the efficiency of using all the assets of the enterprise. The decrease in the coefficient is a consequence of the fall in demand for products
3. Profitability of fixed assets and other non-current assets(/? LV)
/? lv = P/ AB avg	AB avg - average value of non-current assets for the period	Shows the efficiency of using fixed assets. An increase in the ratio with a decrease in the return on total capital ratio indicates an increase in mobile funds
4. Return on equity (R CK)
*ek=P/K ss	Ксс - average value of sources of own funds on the balance sheet for the period	Shows the efficiency of using equity capital. The dynamics of the coefficient affects the level of stock quotes on stock exchanges
5. Return on investment (permanent) capital (RJ
*„ = s/c and	K and - the average value of long-term loans and borrowings and the average amount of equity capital for the period	Shows the effectiveness of using investment capital invested in the activities of the enterprise for a long period of time

However, it should be noted that of the listed profitability indicators, not all of them are more often used in practice, but only the main ones, given in Table. 10.1.

These indicators are studied in dynamics, and the trend of their changes is used to judge the effectiveness of the enterprise’s business activities.

The growth of any profitability indicator depends on common economic phenomena and processes. First of all, this is improving the production management system in a market economy, increasing the efficiency of use of resources by enterprises based on stabilizing mutual settlements and the system of settlement and payment relations, indexing working capital and clearly identifying the sources of their formation.

An important factor in the growth of profitability in modern conditions is the work of enterprises to save resources, which leads to a reduction in costs and, consequently, to an increase in profits. The fact is that developing production by saving resources at this stage is much cheaper than developing new deposits and involving new resources in production. Reducing costs should be the main condition for increasing profitability and profitability of production.

In conclusion, it should be added that when analyzing profitability indicators, the following points must be taken into account:

• 1) profitability directly depends on the organization’s strategy, or more precisely, on the level of risk in business activities, which “requires” a certain level of profit. The higher the risk, the greater the profit the business organization should receive;
• 2) the assessment of the numerator and denominator in profitability indicators differs due to the fact that profit reflects the real result of the enterprise’s activities for the reporting period, and the value of assets formed over a number of years is reflected in the accounting assessment, which may differ greatly from the market one;
• 3) the influence of the time aspect is manifested as follows: liquidity indicators may be relatively low during the reporting period due to the transition to new technologies and other long-term investments; therefore, this decrease can no longer be considered as a negative point.

Let's calculate the dynamics of profitability indicators for the analyzed and previous periods for OJSC "Company".

1. Product profitability (7? pr):

During the analyzed period, product profitability increased by 0.18%, i.e. almost unchanged. All factors that influence changes in sales profit and total costs affect changes in product profitability. They have been analyzed previously.

2. Return on sales (i? n):

Sales profitability in the reporting period increased by the same amount as product profitability, but its level was lower. In general, the level of profitability of both indicators is low, which reflects the influence of the crisis. Factors influencing changes in sales revenue were analyzed in paragraph 9.1, as well as factors shaping sales profit. When calculating all other profitability indicators, the numerator of the formula takes profit before tax for the corresponding period from the profit and loss statement, and the denominator uses balance sheet data as the average value of a particular indicator for the period.

3. Return on equity (RCK)"-

Return on equity increased from 12.4 to 12.8%, i.e. by 0.4%.

4. Return on investment capital (R M):

Return on investment capital remained essentially unchanged, remaining slightly above 9%, but below return on equity.

5. Return on total capital of the company ( Rqk):

In the reporting period, return on total capital decreased from 7 to 6.7%, i.e. by 0.3%.

6. Profitability of fixed assets and other non-current assets (Lav):

The return on non-current assets, in contrast to total capital, increased from 10.8 to 11.5%, i.e. by 0.7%.

7. Return on current assets (/? oR):

The profitability of current assets decreases from 20.2 to 16%, and since the share of current assets in the total capital increases to 42% versus 35% in the base period, this naturally leads to a decrease in profitability of total capital (Table 10.2) .

Change in capital structure

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Ministry of Education of the Russian Federation

GOU SPO "Izhevsk Trade and Economic College"

on the topic of: « Profitability as an indicator of organizational performance»

in the discipline: "Economics of Organization"

Completed by: student

group BS-29 Zagulyaeva O.S.

Izhevsk 2008

Introduction

1. The concept of profitability

2. Types of profitability

4. Profitability indicators

Bibliography

Introduction

A general indicator of the economic efficiency of production is the profitability indicator. Profitability means the profitability of an enterprise. It is calculated by comparing gross revenue or profit with costs or resources used.

Based on the analysis of average profitability levels, it is possible to determine which types of products and which business units provide greater profitability. This becomes especially important in modern market conditions, where the financial stability of an enterprise depends on the specialization and concentration of production.

Currently, in Kazakhstan, during the crisis, there is a tendency towards a significant decrease in the level of profitability of production, which means that many farms are unprofitable. Therefore, as a future specialist, I am interested in what the essence of profitability is, how it is calculated and what are the ways to increase it. This is the range of questions I would like to consider in this topic of the course work.

1. The concept of profitability

The results of the company's work in foreign trade are subject to assessment for any reporting period. In this regard, based on accounting and reporting data, a system of various quantitative and qualitative indicators is calculated, designed to provide a comprehensive assessment of the company’s activities. Efficiency indicators provide an approximate assessment of the profitability of export and import operations. First, let's look at what profitability is.

One of its definitions is: profitability (from German rentabel - profitable, profitable), an indicator of the economic efficiency of production in enterprises. Complexly reflects the use of material, labor and monetary resources. An enterprise that makes a profit is considered profitable.

One more concept of profitability can be cited: profitability is an indicator representing the ratio of profit to the amount of production costs, monetary investments in organizing commercial operations, or the amount of property of the company used to organize its activities.

Profitability is divided as general - the percentage ratio of balance sheet (total) profit to the average annual total cost of production fixed assets and standardized working capital; and estimated profitability - the ratio of estimated profit to the average annual cost of those production assets from which payment for the assets is charged. An indicator of the level of profitability to current costs is also used - the ratio of profit to the cost of commercial or sold products.

Each enterprise independently carries out its production and economic activities on the principles of self-sufficiency and profitability. The enterprise has certain costs for the manufacture of products and their sale. These costs represent the production costs of a given enterprise (cost price), or individual costs. However, the costs of an individual product for enterprises may deviate from the average costs for the industry, which are taken as socially necessary costs or value, the monetary value of which is the price of the product. The presence of individual costs gives rise to the isolation of another part of the cost of production - profit, and, consequently, its relative measurement - profitability.

However, the absolute value of profit does not provide an idea of ​​the level and changes in the efficiency of production or trade. The amount of profit may increase, but production efficiency may remain the same or even decrease. This happens if the increase in profit is obtained due to extensive (quantitative) factors of production - an increase in the number of employees, an increase in the equipment fleet, etc. If, as the number of workers increases, their productivity remains the same or decreases, then production efficiency accordingly does not change or even decreases. The main distinctive features of profitability in the system of trade and industrial relations are the following:

the ratio of profit to production costs, characterizing the level of profitability of current costs (for the purchase of raw materials, supplies, fuel, for depreciation of labor instruments, expenses for management and maintenance of production and wages of workers);

the ratio of profit to the average annual cost of production assets, characterizing the relative size of the increase in advance costs and giving an assessment of the economic efficiency of production assets.

The real meaning is given by the indicators of profitability, which characterize the efficiency of costs based on the profit received after implementation.

The distribution function of profitability is specifically manifested in the fact that its value is one of the main criteria for the distribution of part of the surplus product - profit.

2. Types of profitability

The level of profitability of socialist associations, enterprises and industries is not determined by the law of the average rate of profit, but is established by the state in a planned manner, taking into account the price level and cost of production, the need for funds for the development of production, and economic incentives for workers of enterprises and associations.

Under socialist conditions, the profitability of some enterprises, associations and sectors of the economy increases without prejudice to other enterprises, associations and sectors. The pace of development of industries in the USSR, in contrast to capitalist countries, is determined not by the level of their profitability, but by the state plan for economic and social development.

The profitability of socialist production is characterized by a system of indicators. National economic profitability is defined as the ratio of the entire amount of cash savings (profit and turnover tax) to the average annual cost of fixed production assets and standardized working capital or to the total cost of production. In 1984, industry profitability, calculated as the ratio of the total amount of cash savings to production assets, was (in prices of the corresponding years) 20.5%.

Self-supporting profitability, used in planning, evaluating economic activities and economic stimulation of associations and enterprises, is defined as the ratio of the amount of profit to the average annual cost of fixed production assets and standardized working capital. In 1984, it was 12.1% in industry, including: in mechanical engineering and metalworking - 12.2%, in ferrous metallurgy - 10.7%, in oil production - 19.2%, in light industry - 23.2, in the food industry - 18.5%. Industry profitability, calculated as the ratio of profit to the total cost of production, in 1984 was 16.2%, including: food industry - 11.8%, light industry - 12.3%.

The level of profitability of industrial sectors is directly dependent on the profitability of associations and enterprises. The higher the profitability of associations and enterprises, the higher the level of profitability of industry and the entire national economy as a whole.

The overall profitability of associations and enterprises is determined by the ratio of balance sheet profit to the average annual cost of fixed production assets and standardized working capital and is calculated using the formula

P - profit;

Average annual cost of fixed production assets;

Average annual cost of standardized working capital.

The actual total profitability is determined by the ratio of book profit to the actual average annual cost of production fixed assets and normalized working capital not financed by the bank. The actual balances of normalized working capital are established based on their balance sheet minus the debt to suppliers for accepted payment requests, the payment deadline for which has not come, and to suppliers for uninvoiced supplies, as well as depreciation of low-value and wear-and-tear items and a reserve for compensation of planned losses and upcoming expenses .

The level of profitability depends not only on the amount of profit, but... and on the capital intensity of production. In enterprises of heavy industry associations with high capital intensity of production, the level of profitability in relation to production assets is lower than in associations of light and especially food industry enterprises. With an increase in the amount of profit and a decrease in the cost of fixed production assets and normalized working capital, profitability increases, and vice versa.

Estimated profitability is the ratio of balance sheet profit minus payments for production assets, fixed payments, interest on a bank loan, profit for special purposes (profit from the sale of consumer goods, new household chemicals, etc.), as well as profit received from reasons independent of the activities of the association or enterprise, to the average annual cost of fixed production assets (minus fixed assets for which "1" payment benefits are provided) and standardized working capital.

When analyzing the work of associations and enterprises, especially when planning to assess the profitability of products, profitability is important, defined as the ratio of the amount of profit to the total cost of products sold. The profitability of certain types of products is calculated using the formula

where P is the level of profitability, %;

O -- the enterprise's wholesale price for the product;

C is the total cost of the product.

The profitability indicator for products reflects the efficiency of living and material labor costs for product production.

In mechanical engineering and other manufacturing industries, profitability is defined as the ratio of profit to cost minus the cost of raw materials used, fuel, energy, materials, semi-finished products and components. In this case, the formula can be used

where is the calculated standard of profitability to cost minus material costs;

Production assets of the industry (under branches) of industry;

Profitability standard for production assets;

C-M is the cost of marketable products minus direct material costs.

The use of the indicator of standard estimated profitability in manufacturing industries is due to the high share of material costs in the cost of production of these industries, their significant fluctuations in the cost of certain types of products and the wide possibilities for technological replacement of the raw materials used.

When determining the standard of estimated profitability to the cost of production minus the cost of the used material costs, only direct cost items are excluded from the cost of production in the calculation section. Thus, in mechanical engineering, cost items are deducted from the cost of production: Raw materials and supplies, “Purchased components, semi-finished products and services of cooperative enterprises,” “Fuel and energy for technological purposes.”

The main ways to increase production profitability are the development of the most progressive industries, rational placement of associations and enterprises, increasing the share of specialized production, the use of modern methods of organizing production and labor in accordance with the requirements of scientific and technological progress, accelerating the introduction and development of new, more progressive technology, increasing labor productivity, reducing product costs, improving product quality, strengthening the economy in the expenditure of material, labor and financial resources and increasing the material interest of workers in the results of their work.

3. System of profitability indicators

Profitability indicators characterize the financial results and efficiency of the enterprise. They measure the profitability of an enterprise from various positions and are grouped in accordance with the interests of participants in the economic process and market exchange.

Profitability indicators are important characteristics of the factor environment for generating enterprise profits. Therefore, they are mandatory when conducting a comparative analysis and assessing the financial condition of an enterprise. When analyzing production, profitability indicators are used as a tool for investment policy and pricing

The main profitability indicators can be combined into the following groups

1) indicators of return on capital (assets),

2) product profitability indicators;

3) indicators calculated on the basis of cash flows.

The first group of profitability indicators is formed as the ratio of profit to various indicators of advanced funds, the most important of which are; all assets of the enterprise; investment capital (equity + long-term liabilities); share capital

Discrepancy between levels and profitability for these indicators

characterizes the degree to which an enterprise uses financial levers to increase profitability: long-term loans and other borrowed funds,

These indicators are specific in that they meet the interests of all business participants of the enterprise. For example, the administration of an enterprise is interested in the return (profitability) of all assets (total capital); potential investors and creditors - return on invested capital; owners and founders - profitability of shares, etc.

Each of the listed indicators can be easily modeled using factor dependencies. Consider the following obvious relationship:

This formula reveals the relationship between the profitability of all assets. profitability of sales and asset turnover. Economically, the connection is that the formula directly indicates ways to increase profitability when the return on sales is low, it is necessary to strive to accelerate asset turnover.

Let's consider another factor model of profitability.

as we see, the return on equity (shareholder) capital depends on changes in the level of profitability of products, the rate of turnover of total capital and the ratio of equity and debt capital. Study. Such dependencies are of great importance for assessing the influence of various factors on profitability indicators. From the given dependence. It follows that, other things being equal, the return on equity capital increases with an increase in the share of borrowed funds in the total capital.

The second group of indicators is formed on the basis of calculating the levels and profitability of profit indicators reflected in the reporting of enterprises. For example,

These indicators characterize the profitability of products of the base () and reporting () periods. For example, product profitability based on sales profit

where - - profit from sales of the reporting and base periods;

Sales of products (works, services) of the reporting and base periods;

Cost of products (works, services) of the reporting and base periods;

Change in profitability in the reporting period compared to the base period.

The influence of the factor of change in sales volume is determined by calculation (using the method of chain substitutions)

Accordingly, the impact of a change in cost will be

The sum of factor deviations gives the overall change in profitability in the reporting period compared to the base period;

The third group of profitability indicators is formed similarly to the first and second groups, however, instead of profit, net cash inflow is taken into account.

NPV - net cash inflow

These indicators give an idea of ​​the extent to which an enterprise can pay creditors, borrowers and shareholders with cash in connection with the use of existing cash inflows. The concept of profitability calculated on the basis of cash flow is widely used in countries with developed market economies. It is a priority because cash flow operations that ensure solvency are an essential sign of the state of the enterprise.

4. Profitability indicators

Profitability represents the yield (profitability) of the production and trading process. Its value is measured by the level of profitability. If a business makes a profit, it is considered profitable.

Profitability indicators used in economic calculations characterize relative profitability.

Profit is the monetary expression of the main part of cash savings created by enterprises of any form of ownership. As an economic category, it characterizes the financial result of entrepreneurial activity and is an indicator that most fully reflects production efficiency, the volume and quality of production products, the state of labor productivity, and the level of cost.

Profit is one of the main financial indicators of the plan and assessment of the economic activities of organizations. Profits are used to finance activities for their scientific, technical and socio-economic development, and to increase the wage fund of their employees. Profit is not only a source of meeting the internal business needs of the organization, but is also becoming increasingly important in the formation of budgetary resources, extra-budgetary and charitable funds.

The profitability of an economic entity is characterized by absolute and relative indicators. The absolute indicator of profitability is the amount of profit (income). The relative indicator is the level of profitability.

Absolute indicators allow you to analyze the dynamics of various profit indicators over a number of years. It should be noted that in order to obtain more objective results, indicators should be calculated taking into account inflationary processes.

Relative indicators are less susceptible to inflation because they represent different ratios of profit and invested capital, or profit and production costs.

It is not always possible to judge the level of profitability of an enterprise by the absolute amount of profit, since its size is influenced not only by the quality of work, but also by the scale of activity. Therefore, to characterize the efficiency of an enterprise, along with the absolute amount of profit, a relative indicator is used - the level of profitability.

It is most appropriate to consider these characteristics in relation to other time periods. Absolute numbers themselves convey little information. Only knowing the dynamics of their changes can one more reliably judge the work of the enterprise.

In market conditions, the role of product profitability indicators, which characterize the level of profitability (unprofitability) of its production, is important. Profitability indicators are relative characteristics of the financial results and efficiency of an enterprise. They characterize the relative profitability of an enterprise, measured as a percentage of the cost of funds or capital from various positions.

Product profitability indicators reflect the efficiency of current costs (as opposed to the overall profitability indicator, which characterizes the efficiency of advanced capital) and are calculated as the ratio of profit from product sales to the total cost of products sold:

Rpp = Prp / C * 100%,

where Ррп - product profitability;

Prp - profit from sales of products;

Full cost of goods sold.

The profitability of a particular type of product depends on prices for raw materials, product quality, labor productivity, material and other production costs.

Product profitability shows how much profit is generated per unit of product sold. The growth of this indicator is a consequence of rising prices with constant production costs of sold products (works, services) or a decrease in production costs with constant prices, that is, a decrease in demand for the enterprise’s products, as well as a faster increase in prices than costs.

The return on investment of an enterprise is a profitability indicator that shows the efficiency of using all the assets of the enterprise.

Among the indicators of return on investment of an enterprise, there are 5 main ones:

1. Total return on investment, showing what part of the balance sheet profit falls on 1 ruble. assets of the enterprise, that is, how effectively it is used.

2. Return on investment based on net profit;

3. Return on equity, which makes it possible to establish the relationship between the amount of invested own resources and the amount of profit received from their use.

4. Profitability of long-term financial investments, showing the effectiveness of the enterprise’s investments in the activities of other organizations.

5. Profitability of permanent capital. Shows the efficiency of using capital invested in the activities of a given enterprise for a long period. profitability economics market financial

The growth of any profitability indicator depends on common economic phenomena and processes. This is, first of all, improving the production management system in a market economy based on overcoming the crisis in the financial, credit and monetary systems. This is an increase in the efficiency of use of resources by organizations based on the stabilization of mutual settlements and the system of settlement and payment relations. This is the indexation of working capital and a clear definition of the sources of their formation:

Rk=BP/(K; Rk=Prp/(K; Rk=CP/(K

In the process of analysis, it is necessary to study the dynamics of the listed profitability indicators, the implementation of the plan at their level and conduct inter-farm comparisons with competing enterprises.

Profitability (profitability) indicators are general economic indicators. They reflect the final financial result and are reflected in the balance sheet and statements of profit and loss, sales, income and profitability. Profitability can be considered as a result of the influence of technical and economic factors, and therefore as objects of technical and economic analysis, the main goal of which is to identify the quantitative dependence of the final financial results of production and economic activities on the main technical and economic factors.

Profitability is the result of the production process; it is formed under the influence of factors related to increasing the efficiency of working capital, reducing costs and increasing the profitability of products and individual products. The overall profitability of an enterprise must be considered as a function of a number of quantitative indicators - factors: structure and capital productivity of fixed production assets, turnover of standardized working capital, profitability of products sold

The indicator of production profitability is especially important in modern market conditions, when enterprise management is constantly required to make a number of extraordinary decisions to ensure profitability, and, consequently, the financial stability of the enterprise (company).

Bibliography

1. Enterprise finance. HELL. Sheremyat, R.S. Saifullin, - M.: INFRA, 1998.

2. Enterprise finance. Edited by prof. Kolchina N.V. - M.: UNIT Publishing House, 1998.

3. Directory of an enterprise financier. - M.: INFRA-M, 1996.

4. Bakanov M.I., Sheremyat A.D. Theory of economic activity analysis. - M.: Finance and Statistics, 1998.

5. Kletsky V.I., Strakh I.V. Profit in the economic mechanism, - Minsk, 1986.

6. Finance (textbook) edited by Kovalev A.M. - M.: Publishing House Finance and Statistics, 1999.

7. Sheremyat A., Saifullin R. Methodology of financial analysis of an enterprise. - M.: UNI-GLOB, 1992.

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