Carrying out commercial or financial activities, any enterprise is faced with the need to determine some economic indicators. They are needed to analyze the results of labor and identify their profitability. One of the main indicators is gross profit.
Gross profit is the total profit made before all deductions and deductions. That is, it can be defined as an indicator of the excess of income over all current costs. The gross profit includes depreciation of fixed capital and income from property
Profit is the final result of the enterprise. However, a loss may be incurred at the end of the reporting period. It may be the result of unnecessary production costs or lower than planned income from the sale of goods and services. Therefore, the correct calculation of indicators and production planning are the main conditions for profitable activity.
Some costs are offset by profits and do not relate them to distribution costs. The total costs of the enterprise, which are part of the distribution costs and paid at the expense of profit, are called economic costs. They exceed circulation costs. This is the difference between economic profit and gross. Before calculating gross profit, it is necessary to determine the distribution costs. The difference between gross income and these costs is gross profit. The economic profit of the enterprise will differ from gross profit by the amount of costs not included in the costs of circulation.
Therefore, any enterprise should strive to obtain economic profit, which is the final indicator of the total income received. It shows that the company pays for its production costs and is able to independently finance further development.
There are many indicators of enterprise profitability and profit values. It is determined in percentages and levels. But gross profit is one of the main indicators. It determines the level of income received from the main activity. This is the amount of income from the sale of goods, property, including fixed assets, total income received from all operations not related to the sale, from which all expenses incurred as a result of this activity are deducted.
This indicator fully reveals the results of all the activities of the enterprise. As a result, it is possible to determine unprofitable and profitable business operations. This provides an opportunity for economic analysis and determination of optimal development paths.
Economic analysis is very important in the activities of each enterprise, regardless of what services or goods it sells. The correct planning and organization of labor depends on this. With a negative indicator of activity, it is necessary to identify problem areas, the costs of which exceeded the planned. Reducing the cost of production, that is, the cost of its production, is one of the ways to increase gross profit from its sale. It is profit that provides an opportunity for the further development of the enterprise, the introduction of new technologies, the installation of new technological equipment and the rational use of material resources and labor. The correct additional investment of profit in the development of production, pays off for some time. The main thing is to be able to build the production process rationally and economically. To determine the benefits from the organization of production, there are indicators of gross profit, net profit, profit from sales, profit from other activities, etc.