In the course of their activities, mostenterprises produces a particular type of product. Of course, an organization can do work or provide services, but this does not change the essence. Employees of the enterprise use certain raw materials, materials or something like that, carry out certain actions with them, as a result of which this product is obtained. Then it must be sold in order to recover costs and make a profit. Of course, such a description is very conditional, but the meaning is very clear. During the production process, the company incurs costs, and as a result wants to make a profit. The ratio between these values is reflected by the profitability indicators, one of which is the profitability of the products sold.
So, first decide how to findprofitability of products sold by the company. For this, it is only necessary to divide the profit by the cost price. But the whole problem is precisely what types of profit and cost should be included in the calculation. Let's start with the numerator, that is, with profit. Of course, the vast majority of profitability indicators are calculated on the basis of net profit. The profitability of the products sold to you, too, no one will hurt to calculate in this way, but it will not be entirely true. The fact is that other income and expenses that have no relation to the sale of products also affect the net profit. In this regard, it will be much more correct to use the profit from sales, which you can easily find in the financial statements.
We turn to the denominator fraction, whichrepresents the cost price. Since we estimate the profitability of the products sold, then we should use its cost price. But not everything is so simple, because the cost may be production or full. It is also very easy to make a choice between them. Production cost does not include costs that are associated with the sale of products, so this value can not be used for our purposes. Thus, the calculation should include exactly the total cost, which consists of both the production costs and implementation.
Having decided on the method of calculation, we canfinally, go to the economic meaning of this indicator. The profitability of sales shows how much profit the company receives from each ruble, which was invested in the formation of the full cost of production. This indicator combines the efficiency of not only production, but also implementation. This is the value of this type of profitability.
A few more indicators should be mentioned.which are in many ways similar to those already discussed. When used in the calculation of production costs, we will be able to assess exactly how effective the production activity of the company is. Obviously, this figure will be more than the previous one, since not all costs will be taken into account in the denominator.
And if the denominator does not only take into account allcosts, but also add a profit to it, then we get the value of the revenue there. As a result of the calculations, we will determine the value of the profitability of sales, which characterizes the share in the revenue of the profit that the company receives when selling its products.
A feature of all such indicators isthat for their assessment normative comparisons are not used. The most effective methods for studying profitability are horizontal analysis, which is an analysis of the dynamics, as well as a comparison with indicators of similar enterprises and with average values for the industry to which the company concerned belongs.
