Factor analysis of profit from sales

The company's financial statements are a collection of extremely valuable documents. Their value lies in the information they contain in themselves. In turn, with the use of this information, it is possible to study the activity of an enterprise or firm in some detail. So, based on the balance sheet indicators, you can draw conclusions about the financial stability of the organization and its liquidity, and the form that reflects the information on profits and losses, ie the same name report, allows you to make a factor analysis of profits from sales and other types of profit. This type of analysis makes it possible to identify those incomes and expenses that have a positive or negative impact on the absolute amount of earned profits. It is on this type of analysis that I would like to dwell in more detail.

The factorial analysis of the profit from sales, as already mentioned above, is carried out according to the data of Form 2. It should be taken into account that not all the indicators presented in it affect this type of profit. Obviously, in the calculation it is necessary to take only those indicators that are higher than the profit from sales. After looking at the form of the report, we identify the following factors: the proceeds from the sale of products, the cost of the same products, as well as the amount of commercial and administrative expenses incurred. However, it is worth noting that two important factors influence the amount of revenue received: sales and price. Their influence should be assessed separately. To do this, it is necessary to determine revenue in comparable prices, and only then change it under the influence of price.

With respect to costs affecting sales profits, their influence is determined by studying the change in the relative level. This level is defined as the ratio of a particular type of expenditure to revenue for the relevant period. Then the difference in the levels in the reporting and base periods is multiplied by the revenue of the reporting period. Thus, there is a determination of the impact of cost, commercial and management costs.

Factor analysis of gross profit allows you to take into account even fewer factors, since the amount of this type of profit is not affected by the amount of managerial, as well as commercial costs. By the way, gross profit, strictly speaking, is not entirely correct to call profit, as revenue is not cleared from all costs. More correctly, this indicator is called a margin, but we see that historically, everything is quite different.

We go further on the study report and begin to analyze the net profit of the enterprise. This study will be more detailed than a factor analysis of the profit from sales. This is due to the fact that factors will have to be taken into account much more. In addition to those described above, it is necessary to take into account the impact of income and expenses on other activities, as well as income tax. For this, there is no need to determine their level, since it is sufficient to calculate their absolute change.

It should be noted that factor analysis is used not only to study profits. So, very often factor analysis of current assets, or rather, their turnover. His technique is quite different. This is due to the peculiarities of this type of indicators, since they are relative. Most often in this type of analysis, the chain substitution method and some of its modifications are used.

The profit of the enterprise is a very important indicator, as it is a kind of indicator of efficiency. It is clear that its study should be given enough attention. Factor analysis of profits from sales, as well as other types of profit is a very useful tool. It allows you to identify the factors that most strongly reduce profits, and concentrate the impact on them. In addition, using this type of analysis, it is possible to identify indicators that affect positively, and then use these factors even more intensively.