What does the definition of "enterprise profitability" include?
The definition of "profitability" isindicator of economic efficiency or utility. Simply put, this concept characterizes the level of profitability, as well as the effectiveness of the use of various resources, for example labor, material or monetary. In addition, the definition of the profitability of an enterprise is expressed by the degree of rationality in the use of the land's wealth. Thus, the calculated ratio is calculated as the ratio of profit to available assets, flows or resources. A similar coefficient can be expressed in profit per unit or in the profit that is contained in each unit received.
The definition of "profitability" is percentageexpression. It should also be noted that this concept is least dependent on the inflation rate, but it has a fairly tight interaction with the amount of profit.
Determining the profit and profitability of eacha single enterprise can be carried out using analysis of calculated indicators, such as the return on assets, current assets, fixed assets, return on investments and equity, and the profitability of total investments. Let's consider some of these indicators in more detail.
Profitability of equity capital
This indicator plays a special role in the financialanalysis. This characteristic is expressed by the following formula: the profit received after various deductions to social funds, as well as the payment of taxes, is divided into the available net worth. In this case, the definition of "return on equity" shows the amount of profit in relation to the funds invested by shareholders.
Return on assets
It shows the ratio of the profit afterdeductions to the average value of assets. Profitability of this kind is a characteristic of the profit that the organization receives from one ruble invested in the process of forming assets. In other words, this indicator expresses the degree of profitability of the enterprise for a particular period.
This indicator is expressed by the ratio of netprofit to the value of the average value of OPF. Like other presented indicators, the obtained value must be multiplied by 100%, because, as mentioned earlier, each of the profitability indicators is relative.
Profitableness of current assets
As in all previous ratios, this indicator is the ratio of net profit to the value of current assets.
Definition of "return on investment"
Includes efficiency and rationalityuse of contributions made to develop and promote the organization. This indicator can be found by the following formula: the total amount of profit is divided by the balance sheet, from which the value of the amount aimed at repaying short-term obligations was previously deducted.
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