What does the definition of "enterprise profitability" include?

The definition of "profitability" is an indicator of economic efficiency or utility. Simply put, this concept characterizes the level of profitability, as well as the effectiveness of the use of various resources, for example labor, material or monetary. In addition, the definition of profitability of the enterprise is expressed by the degree of rationality in the use of the land's wealth. Thus, the calculated ratio is calculated as the ratio of profit to available assets, flows or resources. A similar coefficient can be expressed in profit per unit or in the profit that is contained in each unit received.

The definition of "profitability" is a percentage expression. It should also be noted that this concept is least dependent on the inflation rate, but it has a fairly tight interaction with the amount of profit.

Determination of profit and profitability of each individual enterprise can be carried out using analysis of calculated indicators, such as the return on assets, current assets, fixed assets, return on investments and equity, and the profitability of total investments. Let's consider some of these indicators in more detail.

Profitability of equity capital

This indicator plays a special role in financial analysis. This characteristic is expressed by the following formula: the profit received after various deductions to social funds, as well as the payment of taxes, is divided into available equity. At the same time, the definition of "return on equity" shows the amount of profit relative to the funds invested by shareholders.

Return on assets

It shows the ratio of the amount of profit after deductions to the average value of assets. Profitability of this kind is a characteristic of the profit that the organization receives from one ruble invested in the process of forming assets. In other words, this indicator expresses the degree of profitability of the enterprise for a particular period.

Profitability of fixed assets (OPF)

This indicator is expressed by the ratio of net profit to the value of the average value of OPF. Like other presented indicators, the obtained value must be multiplied by 100%, because, as mentioned earlier, each of the profitability indicators is relative.

Profitability of current assets

As in all previous ratios, this indicator is the ratio of net profit to the value of current assets.

The definition of "return on investment"

It includes the effectiveness and rationality of using the funds contributed to the development and promotion of the organization. This indicator can be found by the following formula: the total amount of profit is divided by the balance sheet, from which the value of the amount aimed at paying off short-term obligations was previously deducted.