Any labor activity is characterized by the fact that with the help of labor means this or that effect is made on the subject of labor. In relation to the production activities of the enterprise, the aggregate of means and objects of labor is the value of production assets. This is exactly the part of the property that is directly involved in the production. This reason makes it particularly important to determine the degree of efficiency of use of this part of the assets.
It will be easiest to use the most popular method of evaluating efficiency, so we will look at how to calculate the profitability of production assets. In the general case, profitability indicators are determined through the ratio of profit to that indicator, the profitability of which you need to know. As for our situation, the profitability of production assets is determined by dividing the profit from sales by the average cost of production assets.
It is required to clarify the choice of these indicators. Let's start with the numerator, in which we used the profit from sales. Of course, we could go the simple way and use the value of net profit, as in most indicators of profitability, but this would not be very correct. The fact is that net profit also takes into account the financial result from other activities in which production assets do not participate. But the profit indicator from sales just characterizes the beneficial effect of the sale of pre-manufactured products.
As for the denominator, it is important to explain the use of just the average value here. This choice is due to the fact that the profit is the indicator accumulated for the period, and during this period the value of the property could change. To some extent to smooth out the impact of these changes, the average cost is used in the calculations. Such a calculation will be the most accurate and correct, but it requires additional information and additional labor costs. If these resources are not available, then you can use the cost of production assets at the end of the period, but this can reduce accuracy.
As already noted, the profitability of production assets shows the effectiveness of their use. As for the meaning of specific numerical values, it consists in the amount of profit that falls on each ruble of the value of this part of the assets. Obviously, the larger this value, the more efficiently the company's resources are used.
Production assets of the organization are usually divided into two fundamentally different groups: fixed assets and working capital. Each of these parts represents means and objects of labor, respectively. For these parts, profitability ratios can also be calculated using the same methodology. Please note that the cost is also better to use the average for the period to make the calculations more accurate.
The profitability of production assets must not only be determined, but also analyzed. The methods of analysis in this case are similar to other indicators of profitability. It will be enough to analyze the dynamics of the indicator over several periods (to conduct a horizontal analysis) and compare the values with the industry average or with the levels of analogous enterprises. In addition, you can resort to factor analysis, which will determine the causes of certain changes. For this type of analysis, the methodology of DuPont specialists and the corresponding formulas are often used, but nothing prevents you from using other mathematical models, which, in your opinion, will more accurately reflect the current situation.