The main goal of each commercial enterprise with which its activities are carried out is to make a profit. Profit and profitability are some of the most important indicators characterizing its activities and indicating success or failure. The emergence of new potential opportunities for it depends on the growth of the company's profit , and profit also affects the level of business activity. It is based on profit that the share of income that founders and owners receive is determined. Profit and profitability are inextricably linked concepts. When calculating the profitability of borrowed and own funds, fixed assets, capital and shares, it is profit indicators that are taken into account. In addition to the fact that profit, or rather its receipt is the main goal of each commercial organization, it (profit) is one of the most important economic categories.
As an economic category, the profit of the enterprise reflects the net income that is created in the sphere of material production. The company takes the form of profit net income.
Profit is characterized by the economic effect that is obtained in the course of the enterprise. If the company has a profit, it means that the company's income exceeds its costs.
Profits have an inherent stimulating function. This indicator is both a financial result and also a key element of financial resources. In well-functioning enterprises, the share of net profit that remained at the disposal of the enterprise after payment of all mandatory payments is sufficient to finance the expansion of production, the development of the enterprise in scientific, technical and social terms, as well as the encouragement of employees in material form.
It should be noted that in order to evaluate the effectiveness and economic feasibility that characterizes the activities of the enterprise, only absolute indicators are not enough. In this aspect, profit and profitability should be considered together. In addition , profitability indicators provide an opportunity to see a more objective picture. Profitability ratios are relative characteristics of performance and financial results.
The term profitability comes from the word rent - literally “income”. The broad meaning of the term profitability means profitability, profitability.
Profitability indicators are used when conducting a comparative assessment of the level of efficiency that characterizes the work of individual enterprises and industries engaged in the production of different volumes and types of products. These indicators are a characteristic of profit in relation to the resources that were spent in the production and sale process. The most commonly used indicators used by analysts are product profitability, as well as profit and production profitability.
Most enterprises profit from industrial and business activities. Profit and profitability directly depend on the ability of managers to effectively use planning, analysis, and marketing tools.
The effectiveness of any enterprise depends on knowledge and understanding of market conditions, as well as the ability to timely adapt production development to constantly changing environmental conditions.
A positive amount of profit form the right choice of production profile; creation of competitive conditions for the sale of products; production volumes; ability to reduce production costs.
Profit and profitability are the most important economic indicators!