Each company in the market sees its main goal of making a profit. It is necessary to meet both their own and the needs of workers, as well as for the further development of production. Making any transaction, each entrepreneur calculates all the risks, and most importantly - the possible income. In these calculations, gross profit is the main indicator.
The concept of income in trade expresses the price value of the surplus product that was created by workers in this and other areas involved in the production of this product.
Gross profit is an indicator that can be measured by level or in total. This is the most important criterion that characterizes the end result of an activity.
The ratio of profit to turnover shows the level of profitability related to the sale of goods. This indicator characterizes the distribution costs, the effect obtained from the use of fixed assets, the state of income, the result from the use of labor, the turnover of goods. Profitability characterizes the effect of the enterprise in the general concept.
Gross profit is the final result of the company. It can be not only positive. Sometimes, the result is a loss as a result of excessive production costs or unforeseen expenses in the sale of goods.
In simple terms, profit can be shown as the difference between total gross income and all distribution costs. The amount thus obtained is called gross profit. This is the financial result of the activity. Gross income is the total amount received in the production process.
However, distribution costs do not include all production costs. Some of them come from the profit itself. Therefore, if we consider all the costs of production, then it is necessary to summarize the costs of circulation and other costs that are not included in them. As a result, we obtain economic costs that fully reflect the actual costs of production. Naturally, this indicator will be higher than the distribution costs.
Depending on the category of expenses used, economic profit is also distinguished. Gross revenue is the difference between income received and all distribution costs, and economic is the ratio of total income to economic costs.
The difference between them will correspond to the amount that is the cost that is not included in the distribution costs.
Therefore, the ultimate goal of any activity of each enterprise is to obtain the greatest possible economic profit. It is she who shows the true result of production and its payback.
Analysis of the enterprise involves the use of other indicators. These include the financial result from the sale of goods, fixed assets, net profit, income from any activity not related to the main production, and others.
The financial result from the sale is the indicator that is obtained by subtracting from the profit from the sale of distribution costs. The final result in this case can be not only income, but also loss.
Profit from the sale of fixed assets is the difference between the sale and residual value. When calculating it , inflation rates are also taken into account , increasing the second indicator by the corresponding index.
Income can be received by the company from the sale of securities, bonds or in the form of dividends.
Profit is the main indicator that is used in assessing the activities of the enterprise. It is necessary not only to cover costs and meet the needs of the company. Profit is used to form funds for various purposes.