How to increase the profitability of sales, working in a competitive market. Ways to increase profitability at an industrial enterprise (on the example of unitary enterprise "memz")

The essence of profitability and profitability indicators of the enterprise

In general, profitability means the ability to make a profit. Although profitability is not always the only and main goal of the enterprise, it is an important feature that indicates the effectiveness of functioning in the market. Comparing profitability indicators with the values of competitors, the requirements of owners, etc. can be said about the quality of the work of the management of the enterprise.

The ability to earn a return on invested capital is a key factor in determining the overall value of a company and the value of its securities. Consequently, for many analysts, cost-benefit considerations are a key focus of their analytical efforts.

Profitability reflects the company's competitive position in the market, expansion opportunities, and the quality of enterprise management. The income statement shows the sources of income, components of income and expenses. Profits can be distributed among shareholders or reinvested in the company. Reinvested profits increase solvency and provide a financial cushion against short-term problems.

Profitability (as a system of indicators) is a system of indicators that allows you to determine the efficiency and effectiveness of the enterprise and its components in the direction of generating net profit and financial results. It can be used both at the planning stage and in the operational control of the enterprise, as well as at the end of the financial year in the implementation of a retrospective assessment of the enterprise.

How to calculate profitability (formulas)

Form 2 Line 2400

(Form 1 Line 1600 for the base year + Form 1 Line 1600 a year earlier)*0.5

Return on assets =

Net income (loss)

Calculation example. Net profit in 2014 amounted to 100 thousand rubles, the amount of assets in 2013 was 800 thousand rubles, and in 2014 - 900 thousand rubles. That is, the return on assets in 2014 will be = 100 / (800 + 900) * 0.5 * 100% = 11.76%.

Form 2 Line 2400

(Form 1 Line 1300 for the base year + Form 1 Line 1300 a year earlier)*0.5

Return on equity =

Net income (loss)

(F.1 C.1150 for the base year + F.1 C.1210 for the base year + F.1 C.1150 a year earlier + F.1 C. 1210 a year earlier) * 0.5

Profitability of production assets =

Net income (loss)

Average annual cost of production assets

Return on sales by profit from sales =

Profit (loss) from sales

Return on sales by net profit =

Net income (loss)

Reinvestment rate =

(Increase in reserve capital and retained earnings (loss) for the year

Net income (loss)

(F.1 C.1360 for the base year + F.1 C.1370 for the base year - F.1 C. 1360 a year earlier - F.1 C. 1370 a year earlier)

F.1 S. 1300 for the base year

Economic growth stability coefficient =

Increase in reserve capital and retained earnings (loss) for the year

Amount of equity

Payback period of assets, year =

((Form 1 Line 1600 for the base year + Form 1 Line 1600 a year earlier)*0.5)

Average annual asset value

Net income (loss)

((Form 1 Line 1300 for the base year + Form 1 Line 1300 a year earlier)*0.5)

Net income (loss)

Payback period of equity =

Average annual cost of equity

Net income (loss)

Understanding the calculation results and drawing conclusions on profitability indicators

In general, a high value of the profitability indicator indicates the efficient operation of the enterprise. The normative trend is to increase the value of profitability indicators.

The return on assets shows the amount of net profit, which falls on 1 rub. assets. That is, if, for example, the return on assets of an enterprise is 15%, then this means that each ruble of assets that was used in the activities of the enterprise brought him 0.15 rubles. If the value of the indicator exceeds the cost of long-term borrowings, then this indicates low profitability. A negative value indicates the degradation of the enterprise. A high value means that there are resources to pay dividends to shareholders or support further development.

Return on equity

This indicator is one of the most important for the owners of the enterprise. It testifies to the effectiveness of the use of funds that belong to them. This indicator is more appropriate to compare with alternative areas of investment. For example, if the purchase of shares in another company could bring a higher profit, then the value of the return on equity is not satisfactory. A negative value of the indicator indicates that the owners are losing money and it may be worth considering investing money in other enterprises. The normative trend is a constant increase in the indicator.

Profitability of production assets

This indicator indicates how much profit was brought by production assets - both current and non-current. That is, if the value of the indicator is 20%, then this means that each ruble of production assets brought 0.2 rubles of net profit. As in the previous case, a constant increase in the indicator indicates a constant increase in the efficiency of the production sector of the enterprise.

Profitability of sales by profit from sales

The indicator demonstrates the difference between sales revenue and the main costs of the enterprise - for production, management, promotion of goods and services. This indicator allows you to determine the amount of funds that remain for other expenses - payment for a loan, repayment of income tax obligations, etc. The normative trend is an annual increase in value. A high operating profit may indicate effective cost control.

Return on sales based on net profit

This indicator allows you to roughly determine how much profitability will increase with an increase in sales by 1 ruble. The value of the indicator indicates how much net profit the company received for each ruble of services or goods sold. A negative value indicates the need to search for reserves to reduce costs. A high value of the indicator may indicate a high value of the product or service for the consumer, a strong competitive position and a high level of management professionalism.

Reinvestment rate

The reinvestment ratio indicates the role of net profit in the development of the enterprise. An increase in the indicator indicates that more and more net profit is directed not to the dividend payment fund, but to enterprise development funds. These funds can be used to repair or purchase new fixed assets, intangible assets, etc. If the value of the indicator is above 100%, then this means that net profit was not the only source of increasing the equity capital of the enterprise. A negative value of the indicator occurs only if the enterprise has financial problems.

Economic Growth Sustainability Ratio

The sustainability coefficient of economic growth indicates the stability of the growth of the company's own funds at the expense of profit. A high value indicates the importance of net profit for the continuous development of the enterprise and maintaining its competitiveness at the current level. A low value indicates that the company redistributes profits in favor of the owners (if the return on equity was high), or net profit is not enough to support the development of the enterprise (if the return on equity was low).

Payback period of assets, g

The indicator indicates how much time the amount of assets of the enterprise will double, provided that the current profitability is maintained. For example, a high payback value indicates that the enterprise is inefficient. The normative trend is a decrease in the value of the indicator.

Payback period of own capital, g

The indicator indicates how long it takes for the invested equity capital to fully pay for itself. A significant payback period indicates that the enterprise is inefficient. The normative trend is a decrease in the value of the indicator. If the value of the indicator is very high, then the owners should think about investing in other areas.

The profitability of sales is based on the percentage of the share of profit from each earned monetary unit. Accordingly, the return on sales is defined as the ratio of net profit to the amount of proceeds from the sale of products, multiplied by 100%.

For clarity, consider the formula for calculating the profitability of sales:

Return on sales = net income/sales x 100%.
Return on sales = operating income / revenue x 100%.

To better understand the profitability of sales, you need to be aware of the following facts:

1. Profitability of sales allows you to see the real picture of the sale of the main products. Additionally, the share of the cost in the general scheme for the sale of goods is estimated.

2. Profitability of sales helps in controlling the pricing policy and costs of the enterprise. Different companies use different strategies and techniques, which can cause their profit margins to vary greatly. But, even if companies have the same revenue, operating income, and profit before taxes, their profitability of sales will be different.

3. With the help of return on sales, it is impossible to see the planned effect from long-term investments. If the company intends to change the technological system or purchase innovative equipment, the profit margin may decrease slightly. But, if you choose the right modernization strategy, its performance will quickly recover and even increase.

Methods for increasing profitability of sales

Offer customers a choice of not only ordinary, but also VIP products. This technique is often used by book sellers. They offer to buy, in addition to a standard book, worth 300 rubles, a more expensive gift option, for which you will have to pay, for example, 2000 rubles.

Additional useful features for customers

A striking example is the lighting store: in order to increase the sales margin, in addition to standard fixtures, the buyer also receives economical LEDs with a control panel, as a result, the product becomes more interesting and attractive for him. Yes, its cost increased by about 15-20%, but at the same time, the profitability reached 30%.

When placing an order, customers should offer related products. This is used by all successful online stores today. When viewing products, the buyer is also shown an additional product called “the perfect pair”, for example, when choosing a handbag, the service will automatically select accessories suitable for it.

Replenish your assortment with new products more often. Usually new items have a higher cost than the products of previous lines (collections).

Keep statistics. One day, the managers of a chain of stores conducted a profitability analysis of brands from their catalog, comparing the level of sales before and during the sale period. Brands with the highest margins were identified. Then three categories of brands were formed - good, average, best. As a result, the store identified the most profitable brands, and their share in purchases was increased.

After that, the store's profitability of sales increased by 12%.

Offer exclusive. The release of exclusive offers allows companies to significantly increase their revenues compared to standard options. This includes exclusive production of products, and author's products. So, for example, a manufacturer of lighting fixtures was able to increase marginality by 30%, having achieved its level of 60%.

6 ways to increase sales profitability

Selling an item with a higher value

First you need to attract a client with a good and cheap Chinese product, he will be happy with such an acquisition. But, such profitability will not suit you, and it will not be possible to make a high margin on this product. How to sell more expensive goods? In such a situation, the basis for increasing the profitability of sales is a personal relationship with the consumer. You do not need to offer him a product with a higher cost, it is better to ask what he thinks of him.

History from practice

Recently, one experienced franchise found itself in a rather difficult situation: customers began to buy short-term, the cheapest subscriptions. This led to the constant overcrowding of the club, however, it was not possible to achieve the planned revenue. The club's management decided to completely remove the actively sold season tickets for one or two visits. They were simply unfavorable to the club's long-term development prospects. One-time visits decided to cancel. A three-month subscription has risen in price twice. In order to retain existing customers and attract new ones, the focus has shifted to longer subscriptions.

Namely, the prices of subscriptions remained the same - and even the number of classes that they provide was increased.

Buyers of longer subscriptions were offered installment payments. And the last step in optimizing the company's pricing policy was the provision of guest bonuses to customers. So, each buyer is given the opportunity to bring his friends to the lesson absolutely free of charge. As a rule, thanks to such a one-time visit to the club, in most cases a long-term subscription is bought.

Managers Motivation

Setting the maximum discount percentage. To make a cheaper sale, the manager must negotiate an additional discount with the commercial director or head of sales. In this situation, the profitability of sales may be provided by plans for further work with prospective customers or the promise of a large order, but not the desire of the manager to carry out the plan by any means.

Managers' bonuses should depend on the implementation of the sales profitability plan. The percentage of the sale provided by the company can be multiplied by a certain coefficient - this will form the motivation for managers to implement the sales profitability plan. This indicator can be in the range of 1-1.2. Namely, if the corresponding plan is fulfilled, the coefficient will be 1, and if it is overfulfilled, then already 1.2.

Managers need to be encouraged to sell products that bring maximum profit. For these purposes, it is necessary to assign bonuses accrued on the sale of goods, the cost of which is 2-3 times higher than the price of other commodity items.

Service level

Management and managers are asking one difficult question - how to get more expensive sales. If you understand a little, then the whole principle of action becomes clear. It is necessary to make sure that the value of the product increases, exceeding its cost.

To increase the value of products, you must do the following:

1. Provide free shipping.
2. Establish clear deliveries.
3. Train sales partners.
4. Make the ordering procedure through the company's website as convenient as possible, create a personal account for the wholesale buyer.
5. Hire friendly and competent consultants (or train existing ones).

Increasing the number of items in a receipt

The most natural way to increase your ROI is to make the check longer. This can best be demonstrated by the example of b2c market sales. The length of the check is one of the most important criteria that sellers are guided by.

To understand what services or products can be used to expand the check, you should imagine yourself in the role of a client.

It is necessary to understand what difficulties the client may encounter when purchasing a product, what related products he may need, what else may be of interest to him. Do not be afraid to try, only an initiative person can achieve success. If a customer buys something from you, it means they already trust you. Therefore, the next sale will be easier for him.

Cost reduction

In the process of negotiating the budget of expenses, you need to eliminate everything useless - everything that will not increase your sales in any way. This includes participation in exhibitions, we refuse them. Instead, we focus on relationships with consumers, including potential ones. We carry out targeted mailings, individual presentations, etc.

Increasing the price of products

This method should be used with extreme caution. Consider the sensitivity of customers to major changes, because they may choose a different, more stable product. But, a particular brand (which has risen in price) will have its adherents, who will give almost any money for the product.

It is generalizing and showing it. After all, a sufficient level of profitability indicates the level of profitability of the enterprise, its profitability. In this regard, increasing the profitability of the enterprise is a key activity for increasing income.

How is calculated by comparing the volume or profit of the enterprise with the costs incurred for production or the amount of resources used. After analyzing the average level of profitability, it is possible to establish which products and which divisions of the enterprise provide the required level of profitability, and which are unprofitable. This information is very important in a competitive market economy, because financial indicators directly depend on the concentration and specialization of production.

Increasing the profitability of the enterprise in a situation of increased competition is a paramount task.

As you know, the main source of free cash of the enterprise is the proceeds from the sale of manufactured products. In this regard, the key activity of the entity is to increase the profitability of production by reducing costs and observing the savings regime, as well as the efficient use of the resources available to the enterprise.

After all, these costs determine the level of income and the cost structure. The volume of costs for raw materials occupies a significant share, and therefore, an increase in the profitability of the enterprise and a decrease in the cost of manufactured products will significantly affect the increase in profits. Thanks to this, it is possible to get an increase in profits, which will affect the break-even performance of the organization. In addition to reducing the cost of producing goods, increasing the profitability of sales also significantly affects the increase in the number of products sold. To increase sales, in addition to marketing activities, such products should be produced that meet the requirements of consumers and will be in stable demand.

Each enterprise must have responsible departments on a permanent basis that carry out an analysis of the cost of manufactured products, as well as a full-scale program to reduce it. It should be comprehensive, take into account all possible factors that affect the formation of production and sales costs.

Measures aimed at optimizing the used working time have a positive impact on increasing the profitability of the enterprise.

These include:

Maintaining the optimal number of working personnel;

Reducing the cost of units that are related and do not participate in production;

Constant work on improving the skill level of employees, through which labor productivity will improve, ahead of the average wage;

The use of progressive pay systems, increasing the interest of workers in improving productivity;

Automation of production processes, which reduces the cost of the wage fund;

Increasing labor motivation.

It is also essential to reduce the amount of overhead costs for the operation and management of the production process. This is facilitated by the growth of production volumes through the implementation of reconstruction, technical renovation of the enterprise, reduction in the size of the administrative and managerial apparatus and support services, as well as by improving the production management process.

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MINISTRY OF EDUCATION AND SCIENCE,

YOUTH AND SPORTS OF UKRAINE

ZAPORIZHIA INSTITUTE OF ECONOMICS AND INFORMATION TECHNOLOGIES

Department of International Economics

COURSE WORK

In the discipline "Economics of the enterprise"

Topic: Ways to increase the profitability of an enterprise

Supervisor

Safonova Tatyana Vladimirovna

Performed

student gr.EP - 128

Fomenko Natalya Valerievna

Zaporozhye 2011

INTRODUCTION

1. Profitability, its types and factors affecting it

2. Brief organizational and economic characteristics of the enterprise

3. Assessment of the state of profitability of the enterprise

4. Ways to increase the profitability of the enterprise

CONCLUSIONS AND OFFERS

LITERATURE

INTRODUCTION

The purpose of entrepreneurial activity is not only to make a profit, but also to ensure high profitability of economic activity. Unlike an absolute indicator of profit, profitability is a relative indicator and reflects the degree of profitability of an enterprise. Profitability acts as an economic category, an estimated performance indicator, a target, a tool for calculating the net income of a company, and a source for the formation of various funds.

As a performance indicator, it characterizes the efficiency of the use of available resources, success or failure in business, growth or decline in activity.

As a quantitative indicator, profitability is the difference between the price and cost of goods, between sales and cost (in the sphere of circulation between gross income and turnover costs). Profitability, being the end result of the enterprise, creates conditions for its expansion, development, self-financing and competitiveness.

The relevance of the topic is explained by the fact that the market economy makes it necessary to increase the efficiency of production, primarily at the micro level, i.e. at the level of individual enterprises, since it is enterprises (with any form of ownership) that form the basis of a market economy.

The object of the study is CJSC "Zaporozhye iron ore plant".

The subject of this course work is the profitability of CJSC "ZZHRK".

Therefore, the purpose of the course work is to study the dynamics of profitability indicators and identify reserves for its increase at ZAO Zaporozhye Iron Ore Plant.

Based on the goal, the following tasks can be formulated:

- Define profitability

– to study the types of profitability and factors affecting it

– give a brief description of the enterprise CJSC "ZZHRK"

– evaluate the dynamics of profitability of products, production and sales

– compare the profitability of production with the minimum profitability

– to develop ways to increase the profitability of the enterprise ZZHRK CJSC

To solve the above tasks, the annual financial statements of ZZHRK CJSC for 2007-2008 will be used.

SECTION 1 PROFITABILITY, ITS TYPES AND FACTORS AFFECTING IT

profitability (from German rentabel - profitable, profitable), an indicator of the economic efficiency of production at enterprises. Reflects the use of material, labor and monetary resources. An enterprise that makes a profit is considered profitable.

In other sources: profitability - an indicator that is the ratio of profit to the amount of production costs, cash investments in the organization of commercial operations or the amount of the company's property used to organize its activities.

Without analyzing the level of profitability of products, it is impossible to correctly resolve the issues of the structure of industrial production, its specialization, distribution throughout the country, and determine the efficiency of production of a particular product. Based on the level of profitability of products, the state sets the level of purchase prices for products.

The indicator of profitability is interconnected with all indicators of production efficiency, in particular with the cost of production, capital intensity of production and the speed of turnover of working capital.

Profitability has many modified forms, depending on what profit and resources (expenses) are used in the calculations. Therefore, we consider several classifications indicated in different sources.

Basically, there are five types of profitability:

– return on equity;

– return on assets;

– profitability of production assets;

- profitability of sales;

- product profitability.

The profitability calculation algorithm is the ratio of the result obtained from the use of the object to the costs incurred. In general, this can be represented as follows:

Return on equity reflects the share of profit in equity:

Return on assets (property) shows how much profit an enterprise receives from 1 hryvnia invested in assets:

The profitability of production assets shows how effective the return of funds is:

where OPF - the average value of fixed production assets;

OS - the average value of working capital.

Profitability indicators are actively involved in the analysis of the financial and economic activities of the enterprise, financial planning, development of management decisions, decision-making by creditors and investors.

Return on sales shows the amount of profit per 1 hryvnia of sold products:

The profitability of products characterizes the yield of profit in the process of selling products per unit of costs in the main activities of enterprises

The main indicators of profitability can be shown in table 1.1. "Main indicators of profitability", which is provided by prof. Butinets F. F. in his book "Economic Analysis".

Tab. 1.1 Key profitability indicators

Type of profitability	Formula for calculation	Description
Return on assets based on net profit from ordinary activities, R od		How much profit from ordinary activities is accounted for per unit of funds invested in assets
Return on equity (assets) in terms of net profit, R k (a)		The amount of net profit per unit
		funds invested in capital
Return on equity, R sk		The amount of net profit per unit of equity
Profitability of production assets, R pf		The amount of net profit per unit cost of production assets
Profitability of sold products in terms of profit from sales, R q		The amount of profit from sales, which falls on the unit of revenue
Profitability of sold products in terms of profit from operating activities, R q op		How much profit from operating activities per unit of revenue
Profitability of sold products in terms of net profit, R q h		What is the net profit per unit of revenue
Profitability of products (goods, works, services), R prod		The amount of gross profit from 1 UAH. costs
Return on borrowed capital, R zk		The amount of profit, which falls on 1 UAH. loan capital

Exploring this question, a more detailed classification of profitability was discovered:

– profitability of fixed assets

– coefficient of basic profitability of assets

– return on invested capital

– return on capital employed

– return on total assets

– profitability of business assets

– return on net assets

- margin profitability

But the above profitability indicators are rarely used at enterprises in the calculations.

To assess the performance of an industrial enterprise, it is not enough to use only the profit indicator. For the efficiency of the enterprise, it is necessary to compare the profit and production assets with which it was created.

In this regard, two types of profitability are distinguished: profitability calculated on the basis of financial profit, and profitability calculated on the basis of net profit.

When calculating profitability, various factors can influence its indicator. They are divided into:

1) external, which are associated with the impact on the activities of the enterprise, market or state;

2) internal, i.e. those that the enterprise can change and regulate depending on the goals and objectives. Internal factors, in turn, are divided into production (directly related to the main activity of the enterprise) and non-productive (not directly related to the production of products).

Among the production factors, such as the use of means of labor, objects of labor and labor resources are distinguished. They are important factors in increasing the profit of the enterprise and, accordingly, its profitability.

Production factors can influence the performance of an enterprise from two positions - extensive (quantitative change in the parameters of production elements) and intensive (improving the quality of the use of production factors).

In general, the factors affecting profitability indicators can be represented in the following scheme:

Factors affecting profitability indicators

Internal External

Rice. 1.1 Factors affecting profitability indicators

For the enterprise, indicators of fixed and working capital are important. Based on them, the turnover ratio is calculated, which shows that the faster the capital is turned over at the enterprise, the less it is needed to produce a certain volume of products.

Studying the profitability of capital, it is necessary to note its connection with the profitability of sales, resource productivity. For the first time, this relationship was singled out in the DuPont company: for the first time, the specialists of this company brought together the indicators of profitability of sales and profitability of assets and showed their relationship in the form of a triangular diagram. The diagram of this model looks like this:

Rice. 1.2 Diagram of the DuPont model

This model was based on the following dependence

Where PE is net profit

A - the amount of assets of the enterprise

Revenue - revenue from product sales

It is also worth noting the fact that this DuPont model has been used only recently. Prior to that, she remained unclaimed for a long time.

SECTION 2 BRIEF ORGANIZATIONAL AND ECONOMIC CHARACTERISTICS OF THE ENTERPRISE

The full name of the organization is an enterprise with foreign investments in the form of a closed joint-stock company "Zaporozhye iron ore plant", which is located at the address: Zaporozhye region, Vasilyevsky district, village. Malaya Belozerka, Veselovskoe highway 7 km.

CJSC "ZZHRK" specializes in the development of Yuzhno-Belozersky and Pereverzevsky iron ore deposits and the production of marketable iron ore.

The solemn issuance of the first iron ore from the Yuzhno-Belozerskoye deposit took place on August 28, 1967 at the Yuzhnaya mine. The first phase of the ZZHRK went into operation on December 30, 1969. The extraction of raw materials is carried out in the most difficult hydrogeological conditions - under seven aquifers (including Buchak) at a depth of more than 600 m.

The deposit covers 2.5 km, the average thickness of the ore body is up to 60 m. Explored ore reserves are about 300 million tons.

The ore produced at the enterprise has the highest level of iron content in Ukraine (58-66%).

The structure of ZZHRK includes mines, a crushing and screening plant and auxiliary shops: stowing, repair and mechanical, etc.

The main production unit for the extraction of ore is the Exploitation mine, the largest mine in Ukraine in terms of production volume and number of employees. Its productivity is 3.3-3.5 million tons per year. The task of the Prokhodcheskaya mine is the opening and preparation of horizons.

ZZHRK produces sintering, open-hearth, blast-furnace ore. In the total volume of production, 85% is sinter ore, which contains 62% iron and is significantly superior in quality to the ore of the Krivoy Rog basin and other deposits of the European part of the CIS.

About 60% of products are exported to the Czech Republic, Slovakia, Poland and Austria, and the rest is delivered to Zaporizhstal. In addition, Zaporozhye ore goes to the Mariupol metallurgical plant named after. Ilyich.

The main indicators of the financial and economic activities of the enterprise can be presented in table 2.1.

Tab. 2.1 Economic passport of the enterprise

Indicators	Reporting year in % to last year
		% completed
The volume of marketable products in wholesale current prices without VAT and AS
The volume of marketable products in wholesale comparable prices without VAT and AS
Volume of products sold without VAT and AC (net income from products sold)
Number of SPPs
PPP performance: A) at current prices; B) in comparable prices;
Labor costs
Cost of goods sold
Gross profit
Product profitability
Financial result from ordinary activities
Net profit
Profitability of production (capital)

Formulas for calculations

According to the obtained results of financial and economic activity, it can be concluded that ZZHRK CJSC significantly increased the scale of its activities in 2009 compared to 2008. This conclusion can be drawn on the basis of the following indicators:

1) the volume of marketable products in wholesale current prices in 2009 compared to 2008 increased significantly and amounted to 255% of the figure for 2008;

2) the volume of marketable products in wholesale current prices in 2009 compared to 2008 increased significantly and amounted to 255% of the figure for 2008;

3) the number of industrial and production personnel increased from 4196 people in 2008 to 4242 people in 2009;

4) the wage fund in 2009 increased from 111327 thousand UAH. up to 189069 thousand UAH. and this increase had a negative impact on the activities of the enterprise;

5) the cost of the volume of products sold increased, which affected the increase in the price of products sold and the competitiveness of the enterprise;

6) positive trends were observed in assessing gross profit, which increased compared to 2008 and amounted to UAH 722,946 thousand, which was 626% of the 2009 figure;

7) the indicator of product profitability increased significantly in 2009 and amounted to 723% of the indicator for 2008;

8) in 2009, compared to 2008, the financial result from ordinary activities and net profit increased significantly;

9) due to such a sharp increase in net profit, the profitability of production increased from 7% in 2008 to 77% in 2009, which positively affected the entire activity of the enterprise and its investment attractiveness.

SECTION 3 ASSESSMENT OF THE STATE OF PROFITABILITY OF THE ENTERPRISE

3.1 Analysis of the profitability of production activities and the influence of factors on its change

The profitability of products is an indicator that characterizes the efficiency of the enterprise's costs for the production and sale of products. It is equal to the ratio of gross or net profit to the sum of costs for products sold.

This indicator shows how much the company has a gross profit from each hryvnia spent on production.

This indicator shows how much the company has a net profit from each hryvnia spent on the production and sale of products.

It can be calculated as a whole for the enterprise, its individual divisions and types of products.

This ratio shows how profitable the final result of the main activity of the enterprise is. It helps, in particular, to solve the current and strategic tasks of the enterprise.

The goal of any enterprise in the market is to maximize profits, so the enterprise needs to decide which products are unprofitable for production and sale, and which ones, on the contrary, should increase production volumes due to the high profitability of these products. To do this, the company needs to evaluate the profitability for each type of product and make an appropriate decision.

After assessing the profitability of each type of product, it is possible to determine the reserves for reducing the cost of production, ways to improve product quality, and this, in turn, increases the profitability of products and improves the financial and economic condition of the enterprise.

When evaluating relative performance indicators, much attention is paid to determining the factors that affect the change in these indicators. In particular, the three factors shown in Figure 3.1 affect the profitability of production activities.

Rice. 3.1 Factors affecting the profitability of products

Other factors affecting this profitability indicator include product quality, market conditions, direct material costs, labor costs, etc.

When evaluating the profitability of products, it can be classified as follows:

1) by the level of profitability:

a) unprofitable types of products;

b) low profitability;

c) average profitability;

d) high profitability.

2) by the change in profitability compared to previous periods:

a) increase the level of profitability;

b) a slight change in the level of profitability;

c) decrease in the level of profitability.

To assess the profitability of ZZHRK CJSC products, it is necessary to compile a table with initial information for calculating the required indicators.

Tab. 3.1 Indicators for assessing the profitability of ZZHRK CJSC products

Rice. 3.1 Dynamics of profitability of products of ZZHRK CJSC

As can be seen from Table. 3.2 the profitability index of products in 2009 compared to 2008 has increased significantly. The data obtained during the analysis indicate that the profitability of production activities in 2009 compared to 2008 increased by 87.6% due to the influence of two factors:

1) by increasing gross profit by UAH 607,441 thousand;

2) by increasing the cost by UAH 194,896 thousand, which negatively affected the growth of product profitability, but did not lead the company to a loss due to an increase in gross profit;

In order for the profitability of products to grow at the same pace, the enterprise needs to evaluate the profitability of each type of manufactured product and, based on the results of such a check, determine which types of products should be produced in large quantities due to their high profitability, and which ones should be abandoned due to their unprofitability. .

Thus, the above measures will increase the level of product profitability, which will increase investment attractiveness, which is an important quality of any enterprise in modern market conditions.

3.2 Analysis of sales profitability and the influence of factors on its change

The return on sales ratio is used in evaluating the effectiveness of business activities and pricing processes.

The profitability of sales means such a profitability ratio that shows the share of profit in each earned hryvnia of sold products. This coefficient characterizes the efficiency of production and commercial activities of the enterprise.

To determine the profitability of sales, various types of profit are used: gross profit, profit from sales, profit before tax, net profit. These indicators are correlated with the volume of products sold to determine how much profit falls on a unit of finished product. In this regard, the following formulas are used to assess the profitability of sales

Profit from sales of products depends in general on the following factors:

1) sales volume of products;

2) product structure;

3) the cost of production;

4) the level of selling prices.

At the same time, the volume of sales of products can have both a positive and a negative impact on profit. Positive is observed in the case when the volume of sales of profitable products increases, which leads to an increase in profits, and negative - in the case when the volume of sales of unprofitable products increases, which will inevitably lead to a decrease in profits. In the same way, the structure of products has a twofold effect on the amount of profit, since if the share of profitable types of products increases, the amount of profit will increase, and if the share of unprofitable types increases, the amount of profit will decrease.

To assess the profitability of sales of the enterprise ZZHRK CJSC, it is necessary to compile a table with initial information.

Tab. 3.2 Indicators for analyzing the profitability of sales at ZZHRK CJSC

Rice. 3.2 Dynamics of profitability of sales of ZZHRK CJSC

As can be seen from Table 3.2, the return on sales in 2008 was 19%, and in the next year, 2009, this figure increased significantly and amounted to 48%, i.е. the deviation was +29%.

In order to increase the profitability of sales, the company needs to analyze the sales structure, determine which types of products are unprofitable and refuse to sell them due to their unprofitability. Also, the company needs to revise the cost structure when calculating the cost of production, to determine how this figure can be reduced.

3.3 Analysis of return on equity and the influence of factors on its change

Each enterprise needs to know all the information about the profitability of its activities. Such an indicator may be the profitability of the enterprise (assets).

The profitability of an enterprise (assets) is an indicator that is an important characteristic of the factor environment for the formation of an enterprise's profit.

This indicator is a mandatory element of the analysis and assessment of the financial condition of the enterprise. It is calculated as the ratio of profit (gross, operating, net) to the average annual value of the company's assets.

Where P cap - return on capital,%

Average annual value of assets, thousand UAH

In the economic literature, this indicator is most often called the general, economic profitability, profitability of production or profitability of capital.

The level and dynamics of this type of profitability can be influenced by various factors of production and economic activity. The main ones include (according to Moshensky):

1) the level of organization of production and management;

2) capital structure;

3) the degree of use of production resources;

4) volume, quality and structure of products;

5) production costs and production costs;

6) profit by type of activity and direction of its use.

The return on equity ratio is of interest primarily to investors. And also for existing and potential owners and shareholders. The return on equity shows how much profit each unit of money invested by the owners of capital brings. Return on equity is calculated by the formula:

It is the main indicator used to characterize the effectiveness of investments in activities of a particular type.

In foreign practice, the concept of the threshold of profitability, or the break-even point, and the margin of financial strength of the enterprise is often used.

The threshold of profitability is usually understood as such a volume of sales proceeds at which the profit is zero, but at the same time the enterprise fully covers its costs.

In addition to this indicator, the financial strength indicator is also used, showing how much the sales proceeds exceed the profitability threshold. If this value is negative, then the enterprise is unprofitable.

In order to assess the level of return on capital of the enterprise we are considering, it is necessary to compile a table with initial information for calculating the indicator.

Tab. 3.3 Indicators for the analysis of return on equity of the enterprise CJSC "ZZHRK"

Rice. 3.3 Dynamics of return on equity of ZZHRK CJSC

As can be seen from Table. 3.3, the return on equity at ZZHRK CJSC increased significantly in 2009 compared to 2008 from 15.5% to 136% due to changes in the company's net profit. The return on equity was practically not affected by the change in the cost of capital. But, due to the fact that the profit factor had a greater impact on the profitability indicator than the change in the amount of capital, this resulted in an increase in the total return on capital, which means the fact that the company rationally organized its activities and responded well to changes taking place in the market .

Return on equity increased from 7.3% to 81.9%. The indicator of own capital indicates that each hryvnia invested by the owners of capital brought a profit of 7.3 kopecks. in 2008, and 81.9 kopecks. in 2009.

In order to increase the level of return on capital in the future, the company needs to carefully consider all planned indicators for the next year and improve its trade policy in order to quickly respond to all external changes in the structure of the goods market.

3.4 Profitability analysis using the DuPont Model

To conduct a general assessment of the situation at the enterprise, it is enough to study the influence of general factors on the level of return on capital, i.e. first level factors. However, when it is necessary to improve the efficiency of capital use, analysis is carried out on the basis of more detailed factorial models.

Of the various models of factor analysis of return on capital, the simplest is the two-factor model of capital analysis (Dupon Model).

Where: Р cap - return on equity, %

PE - net profit, thousand UAH.

NRP - net sold products, thousand UAH.

The average annual amount of capital, thousand UAH.

R sales - profitability of sales, thousand UAH.

О cap - capital turnover, times.

This model shows that the return on equity is equal to the product of two factors: the return on sales and the capital turnover ratio. The first of these factors shows the efficiency of the main activity of the enterprise associated with the production and sale of products (goods, works, services), and the second - the speed of turnover of its property. Return on equity, based on the DuPont model, is a synthetic indicator and combines both aspects of its activities.

In order to evaluate the return on capital according to the DuPont model at ZZHRK CJSC, you must first build a table with initial data.

Tab. 3.4 Indicators for the analysis of return on equity according to the DuPont model at CJSC ZZHRK

Indicator	Deviation, ±	Growth rate, %
Net profit, thousand UAH
Net sales, thousand UAH
Average annual value of assets, thousand UAH
Return on sales, %
Capital turnover, times
Return on equity, %

Rice. 3.4. Dynamics of return on equity of the enterprise ZZHRK CJSC using the Dupont Model

In order to quantify the impact of a change in each of the factors on a change in the effective indicator (return on equity), you can use the chain substitution method.

To do this, we will carry out the following calculations:

one). we build a factorial model of return on capital:

2). we find the change in the rate of return on capital in 2009 compared to 2008:

3). we replace the planned indicator with the actual one:

4). we measure the influence of factors on the change in the result:

five). doing a check

As can be seen from the above calculations, the return on equity in 2009 compared to 2008 increased by 121.5%. As we found out, this was the result of the influence on it of a change in the return on sales indicator, which gave such an increase in the level of return on capital.

Thus, at the enterprise we are considering, in order to further increase the return on capital, it is necessary to improve the efficiency of its activities related to the production and sale of products (goods, works, services). This can be done in the following ways: searching for new markets, abandoning unprofitable types of products, improving product quality, reducing production costs, etc.

profitability enterprise indicator

SECTION 4 WAYS TO INCREASE THE PROFITABILITY OF THE ENTERPRISE

Profitability is a complex category. It shows how profitable the activity of the enterprise is, and, therefore, the higher the profitability indicators, the more efficient the activity. Therefore, the company needs to find new ways to increase profitability in order to ensure higher performance.

The alternative search for ways to increase profitability is determined by the variety of its indicators. It should also be taken into account that when analyzing ways to increase profitability, it is important to separate the influence of external and internal factors. The external factor includes the expansion of the sales market for products by reducing the price of the goods offered. Internal factors are more important than external ones. These include: an increase in production volumes, a decrease in the cost of production, an increase in the return on fixed assets, etc.

An equally important factor affecting profitability is the presence of debts and debts in an enterprise. The most optimal situation is when the company resorts to additional loans to upgrade equipment or assortment.

The source of growth in the profitability indicator can be the introduction of innovations that make it possible to produce a new type of goods with better quality, develop new markets for products, introduce organizational and managerial innovations, etc.

Any commercial organization and enterprise seeks to develop and expand its activities. The growth and development of an enterprise, in particular an industrial enterprise, are closely related to the development and implementation of strategies and tactics for managing the process of formation, increase and distribution of profitability. In theory, there are different views and opinions on the process of increasing this indicator, different approaches to the implementation of this process. According to one of the many approaches, the growth of the profitability of an enterprise is facilitated by the manipulation of three factors that determine its profitability:

1) acceleration of commodity turnover;

2) reduction in the mass of costs;

3) an increase in the rate of return by raising prices.

However, these factors are not the only ones. Western enterprises adhere to the theory that the long-term profitability of an enterprise depends on more than 30 factors. They include the state of the situation on the manufacturer's market, the market situation, the presence of competitors. But before changing any factor, it is necessary to decide for what purpose this will be done. There are 4 types of innovations that generate profitability:

1) the sale of new goods, goods with higher quality characteristics compared to previously and currently sold products;

2) development of a new market;

3) introduction of new methods of sales, provision of additional services, development of new sources of supply of goods;

4) organizational and managerial innovations.

The first type provides an increase in profitability indicators with a simultaneous increase in sales volume. The second type creates conditions for increasing the mass of profitability due to the growth of working capital. The third type involves the implementation of one of the strategies:

1) price reduction with a decrease in the cost of production and sale of goods, counting on such an increase in sales that will increase the mass of profitability;

2) do not change the sales price, then the growth of profitability will be ensured due to the increase in the rate of entrepreneurial income.

As a result of the fourth type of innovation, labor productivity should increase, inventory turnover will accelerate, and the efficiency of resource use will increase.

In this course work, it was found that the profitability of ZZHRK CJSC in 2009 compared to 2008 increased significantly, due to the influence of various factors. It is advisable to look for ways to increase the profitability indicator in the following articles of the financial statements:

1) the volume of marketable products in wholesale current prices;

2) the number of PPP;

3) the volume of gross profit;

4) financial results from ordinary activities;

5) the amount of net profit.

Based on the information on the expenses of the enterprise (Form 2 "Report on financial results" for 2009), we can conclude that the most appropriate decision that a manager can make to increase the profitability indicator is to organize strict control over the expenses of the enterprise, draw up estimates for expenses.

CONCLUSIONS AND OFFERS

The indicator of profitability is of particular importance in today's market conditions, when management needs to make extraordinary decisions to ensure profitability and form the financial stability of the enterprise.

The goal of any enterprise is, ultimately, to obtain high profitability, which is able to ensure the further development of the enterprise. Profitability is not only the main goal, but also the main condition for the business activity of the enterprise, the result of its activities.

The significance of the profitability ratio is very high, since not only the managers and employees of the enterprise, but also the state, creditors, borrowers, and other counterparties are interested in it. An increase in the level of profitability for an enterprise means an increase in its financial stability, and, accordingly, an increase in funds allocated for material incentives, and for management, profitability shows information about the results of the applied tactics and strategy.

Profitability, taking into account the differences between its expected and received level, performs the following four functions:

1) expected profitability is the basis for making investment decisions;

2) the resulting profitability acts as a measure of the results of the enterprise;

3) a part of the obtained profitability is a source of self-financing of the enterprise;

4) part of the profitability comes as a reward to the owners of capital (under the conditions of joint-stock ownership).

In this course work, such indicators of profitability as the profitability of products, profitability of capital and profitability of sales were analyzed.

The purpose of the analysis of the profitability indicator of production activities at the enterprise was to determine the value of this indicator and to identify factors influencing its formation, as well as to determine measures to increase profitability. These activities include: assessing the profitability of each type of product, and then making a decision regarding the production of these types of products in case they turn out to be unprofitable.

After analyzing the profitability of products, we determined that the profitability index in 2009 compared to 2008 increased from 26.2% to 113.7%. We found out that this fact was due to the fact that the gross profit indicator, which directly affects the profitability indicator, increased in 2009 compared to 2008 by UAH 607,441 thousand. In turn, the cost of sales, which inversely affects the indicator profitability increased by UAH 194,896 thousand.

The indicator of return on sales characterizes the efficiency of production and commercial activities and shows how much the company has a net profit from the hryvnia of sold products. Based on these indicators, the effectiveness of enterprise management is assessed, i.e. its ability to make a profit from its core business. However, this indicator is rather problematic, since there are many algorithms for its calculation. This does not allow, in turn, to correctly assess this indicator.

An analysis of this indicator at ZZHRK CJSC showed that the profitability of sales in 2009 compared to 2008 increased from 19% to 48%. This was the result of the fact that in 2009 the proceeds from sales increased significantly - from UAH 602,072 thousand. in 2008 to 1500668 thousand UAH. in 2009. In order to increase the profitability indicator, the company needs to analyze the sales structure and refuse to sell those types of products that are unprofitable.

By analyzing the rate of return on capital in an enterprise, it is possible to determine the level of their management, further development prospects, the competitiveness of the enterprise under study in the market, and for investors to determine the profitability of investing capital.

When analyzing the return on equity at ZZHRK CJSC, we determined that the rate of return in 2009 compared to 2008 increased significantly from 15.5% to 136%. This was the result of the fact that in 2009 the company's net profit increased significantly (from UAH 26,262 thousand to UAH 551,370 thousand), which directly affects the rate of return on capital. Also, in the course of the analysis of the return on capital at the enterprise, we found that its indicator in 2009 was positively affected by the increase in the net profit of the enterprise, associated with the rational organization of the main activity of the enterprise. Therefore, from the point of view of investment, we can say that this enterprise is investment attractive.

To eliminate all factors that negatively affect the formation of profitability and financial stability indicators, the management of the enterprise needs to take the following measures:

1) to ensure the outstripping growth of financial results over the total capital by intensifying the work of employees and reducing the material intensity, energy intensity and labor intensity of products;

2) the introduction of new technologies to reduce the cost of production;

3) identifying the most profitable types of products and optimizing the structure of its sale;

4) strict control over costs in all areas of the enterprise through the preparation of cost estimates.

BIBLIOGRAPHY

1. Moshensky S. Z., Oleinik O. V. Economic analysis: A textbook for students of economic specialties of higher educational institutions. / Ed. Prof., Honored Worker of Science and Technology of Ukraine F. F. Butints. - 2nd ed., add. and reworked. - Zhytomyr: PE "Ruta", 2007. - 704 p.;

2. Economic Analysis: Textbook / Ed. prof. A. G. Zagorodny. - 3rd ed., revised. and additional - M.: Knowledge, 2008. - 487 p.;

3. Economics of an industrial enterprise: Textbook. - 2nd ed., revised. and additional - M.: INFRA-M, 1999. - 336 p.;

4. Savitskaya GV Economic analysis of the enterprise: Scientific manual - 2nd ed., Revised. and additional - K.: Knowledge, 2005. - 662 p.;

5. Cherep A.V. "Economic analysis": Heading guide. - L .: Condor, 2005. - 160s.;

6. Scientific journal "Economics of Ukraine", No. 8 (565), 2009. "Identification of priority types of products of an industrial enterprise in market conditions" Poshivalov V., Ryzhov V., p.25;

7. Magazine "Business" No. 13 (532), No. 13 (532), 31.03.2003

8. Magazine "Commercial Director" No. 11, November 2006 "Calculates profitability correctly", Vasiliev D.

9. Ivanilov O. S. Economics of the enterprise: a textbook [for students of higher scientific institutions] / O. S. Ivanilov - K .: Center for Educational Literature, 2009. 728 p.

10. Ivakhnenko V. M. Course of economic analysis: Scientific guide. - 5th ed., revised. and additional - K .: Knowledge, 2006. - 261 p.

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How to increase the profitability of sales, working in a competitive market. Ways to increase profitability at an industrial enterprise (on the example of unitary enterprise "memz")

The essence of profitability and profitability indicators of the enterprise

How to calculate profitability (formulas)

Understanding the calculation results and drawing conclusions on profitability indicators

Methods for increasing profitability of sales

6 ways to increase sales profitability

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How to increase the profitability of sales, working in a competitive market. Ways to increase profitability at an industrial enterprise (on the example of unitary enterprise "memz")

The essence of profitability and profitability indicators of the enterprise

How to calculate profitability (formulas)

Understanding the calculation results and drawing conclusions on profitability indicators

Methods for increasing profitability of sales

6 ways to increase sales profitability

Send your good work in the knowledge base is simple. Use the form below

Similar Documents

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