In order to determine the degree of efficiency of the enterprise, it is necessary to resort to the calculation of certain indicators. As a rule, they determine the relative level of profitability and are called profitability indicators. There is no such indicator that would characterize the overall profitability of the enterprise. This is due to the fact that the activities of the company are multifaceted and each of these indicators separately characterizes the efficiency of using a particular resource.
A fairly generalized production activity of an enterprise can be defined as the impact of the means of labor on objects of labor. Objects representing both objects of labor and its means are the property of the enterprise, and in the aggregate they comprise production assets. The total profitability of production assets is calculated by the ratio of profit to their value. Production assets are used for production, that is, the implementation of core activities. This leads to the fact that the profit indicator used in the calculations should not include other income and expenses. This indicator is the profit from sales, and it is he who is usually used in determining this type of profitability. As for the value of the property, the profitability of which is calculated, there is also some peculiarity here. It consists in the fact that profit is a quantity that accumulates during the period and is presented exactly in the statements. And the cost is reflected in the balance sheet for a certain date, so it is difficult to account for possible changes. It is best to use the average cost in the calculations, and with a lack of information, you can allow the calculation based on the cost at the end of the period.
Production assets are only part of the assets, but the general profitability of all property is usually set. The calculation method is completely similar and consists in dividing profit by the value of assets. This cost should also be calculated as average, if possible. As for profit, the profit from sales here, as a rule, is not used. Most often, calculations are based on net profit. Also, sometimes there are indicators of return on assets, which are calculated on profit before tax. Thus, profitability may be somewhat overstated, but this influence is eliminated in the process of further analysis.
Analysis of profitability indicators most often consists in using the method of comparisons. The simplest and most obvious method, which allows you to judge the dynamics of the effectiveness of the company, is a horizontal analysis. It consists in determining the absolute and relative changes in profitability indicators over several periods with the establishment of patterns and trends. If it is possible to use more information, then you can apply comparisons not only in time but also in space - with the performance of other similar enterprises. In addition, you can compare the profitability achieved at this enterprise, with indicators specific to the industry as a whole.
Noteworthy is the fact that the overall return on assets and production assets can be subjected to factor analysis. This type of analysis consists in a certain transformation of the mathematical model of indicators, which implies its expansion or extension. Such transformations can identify factors that affect profitability, after which their specific quantitative impact is determined. This analysis can be carried out according to the method of DuPont or by any other suitable method.