As you know, economic profit in its pure form is the difference that is formed between the so-called balance sheet profit and the group of obligatory payments, including taxes on the financial results obtained and, accordingly, on profit. It is worth noting that the taxes paid on financial results include the following: tax on property owned by the enterprise, on the maintenance of socio-cultural and housing funds, on the needs and maintenance of the police and education, and others. This is a fairly serious tax burden. At the same time, it is imperative to take into account that, in accordance with Russian laws, income tax is calculated on the basis of retained earnings, which, of course, are significantly higher than the real profit, which fully reflects the economic and financial activities of an enterprise. As a result, there may be cases when not only economic profit, but also partially current assets becomes part of the amount of tax payment . Thus, the proceeds from the sale of products may not always fully provide sufficient profit.
Profit Functions
Profit, being one of the most important categories existing in market relations, naturally performs a number of functions. First of all, it should be noted that profit primarily characterizes the effectiveness of activities. It is clear that the very existence of such a fact as economic profit indicates that the enterprise is profitable, and the proceeds from the sale of products are sufficient for the development of production.
Secondly, do not forget about the so-called stimulating function of profit. It is in the presence of the latter that it is possible to carry out various kinds of social programs, develop production, increase directly capital and the like.
The third position in this list is the function of profit as an indicator of the effectiveness of various investment projects, for example, the introduction of new technological processes, equipment, while the determination of revenue will depend on production efficiency. The effectiveness of various marketing technologies can be evaluated in this way.
Cost reduction as a way to increase profits
For any manufacturer, one of the primary tasks is to reduce costs, which will naturally increase profits. Performing such an operation as determining revenue. It is not necessary to unconditionally and, most importantly, absolutely evaluate the figures obtained, it is important to take into account such an indicator as the cost of production. In practice, the classic options for reducing costs are, of course, saving fuel and raw materials, labor costs by modernizing production, reducing commercial and administrative costs, and so on. It should be remembered that the reduction in the cost of production should be justified and take into account the fact that at a certain level there is already a decrease in quality, while economic profit will also decrease, and this will exponentially.
At the present stage of development, the so-called innovative methods of cost reduction, for example, management accounting, have become widespread. It allows you to effectively control the costs, total costs of the enterprise. As a variety, accounting can be applied, distributed among responsibility centers, when part of the management functions is assigned to linear management structures, which, in turn, bear full or partial responsibility for the actual indicators of expenses within the planned values and indicators.