Gross profit rate standard. Profit rate. Net profit rate. factor model of the Du Pont company

The meaning and end result of any business is to generate income. Correct analysis helps answer the question of whether the enterprise is efficient enough and meets the requirements of economic benefit.

A separate area in assessing the effectiveness of resource involvement, as well as the difference between income and expenses, is the analysis of profit indicators. In this article we will look at current profit indicators, as well as formulas for calculating them.

What is profit?

Economic science interprets that profit is those benefits that appeared as a result of the economic activity of a subject of market relations. That is, the difference between the income and expenses of the enterprise. If the result is a number greater than 0, then a profit is made, and if vice versa, then the company suffered losses.

To analyze business performance, many financial indicators are used. One of the main ones is normal and economic profit.

It is not clear to the average person why economists divide profits into different types and how they can differ. After all, if an enterprise’s accounting indicators are normal and it makes a profit, then in economic terms an open business may not be feasible. How so? Let's take a closer look next.

Types and indicators of profit

The economic concept of profit is quite broad and is assessed from different angles. But often types of profit are considered from the perspective of financial results:

gross;
from the sale of goods or services;
taxable;
clean.

Gross profit is all the profit earned by a firm from manufacturing and non-manufacturing activities that is shown and accounted for on the balance sheet.

With profit from selling goods or providing services, everything is much simpler. This is the revenue that remains after subtracting the direct costs of producing new goods from income from business activities. It is very important that in this type of profit you cannot take into account income and expenses from non-productive activities, as this may affect the final result.

In order to find out the taxable profit, it is necessary to subtract the debit result from the credit for the current period. It is from the result that it is necessary to calculate the amount that must be paid as tax deductions.

Net profit is the balance sheet profit after payment of all taxes, fees and other budget contributions. That is, we can say that this is the financial result that is then used to pay dividends to shareholders (if the form of ownership is a joint stock company) or remains for the purchase of new additional resources, of course, depending on one or another management policy.

We will pay special attention to the consideration of normal and economic profit.

Normal profit

Those who are just beginning to encounter economic concepts may mistakenly think that this indicator reflects the company’s revenue in some way. But this is not true at all.

This indicator is needed in order to determine what the level of profit should be to maintain the economic feasibility of using resources in the production of a particular product. If the level is insufficient, then it is worth using resources differently.

Why is normal profit calculated?

Normal profit can be considered as the level of profitability of any capital that it would be if it were invested in the form of a loan or loan. Simply put, if you take into account the implicit costs of the enterprise, then the business should generate more income than if the available funds were used in another business.

If we consider the business from the manager’s point of view, and not the efficiency of using available funds, then normal profit is the payment that is needed so that he is interested in doing this particular business.

Thus, it turns out that normal profit does not mean revenue at all, but part of economic costs. If the total income of the enterprise is equal to the above costs, then normal profit appears. The formula looks like this:

Mon = Inya,
Where:
Inya - the costs are implicit.

Thus, the concept of normal profit given above can be confirmed.

Economic profit

So, let's move on to the next indicator. Economic profit is the revenue that remains after subtracting all expenses from income.

If you subtract economic costs from total income.
If you subtract implicit costs from accounting profit.

Both of these paths are the same, although visually different from each other. After all, accounting profit already takes into account explicit costs that are included in economic costs.

Some scientific publications propose to find economic profit in the following way:

Ep = Pb - Mon,
Where:
Ep - economic profit;
Pb - accounting profit;
Mon - normal profit.

What should you remember about economic analysis?

The above indicators are used when conducting an economic analysis of the enterprise's activities. It is needed in order to understand whether it is worth pursuing an open business or whether it is better to invest your resources and time in another area.

They are used both when conducting a financial assessment and to carry out a general analysis of the state of affairs of the organization.

But it is not enough to simply calculate each of the above indicators according to the given formulas. In order to correctly assess the correctness of the policy pursued by the management of the enterprise and draw a conclusion about the profitability of the business, it is necessary to evaluate all costs, the efficiency of personnel and the return on resources involved in production.

In addition, it is necessary to conduct a horizontal and vertical analysis of the enterprise’s balance sheet, calculate the coefficients of capital productivity, profitability, solvency and some others, which help to give a correct assessment of the liquidity and financial stability of the enterprise.

The purpose of commercial activity is to make a profit, therefore in economics much attention is paid to its analysis.

The level of net profit determines the possibility of developing an organization in the long term.

Definition of net profit, its meaning and characteristics

Profit is a positive result between costs and revenue received over a certain period of time.

This is an important indicator characterizing the business on the market, the effectiveness of using the company’s capabilities and the quality of the final product. The profit of an enterprise is one of the sources of budget revenues that support the well-being of the country.

The company management has at its disposal net profit, which represents the financial result after payments to the budget and dividends to shareholders.

This financial result characterizes the company's stability in the market, allowing it to attract investors, thereby reducing the risk of bankruptcy. Socially responsible organizations direct resources from net profits to increase wages and pay bonuses to employees.

The need to classify financial results lies in the fact that at different stages of activity they use various determination methods arrived. Analyzing each type separately allows you to identify problems at an early stage.

In economics, profits are classified according to various factors.

Basic classification directions:

type of activity (production, provision of services);
period of profit (year, quarter, month);
type of business transactions (rent, investment activities, work with securities);
method of grouping income (economic, accounting, operational, non-release).

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Calculation formulas

Each type of enterprise profit characterizes efficient use of enterprise resources, allows management to make decisions for further development.

Gross

Gross profit characterizes the efficiency of managing the enterprise's funds and is calculated using the formula:

VP = B – SP

where VP is gross profit, B is revenue, SP is cost.

When calculating the costs of producing a product (service), the cost of goods (services), taxes paid to the budget (except for income tax), employee salaries and other indirect costs related to the production process are taken into account.

operating room

This type of profit is the financial result that the company received in the course of its core activities.

The calculation formula is as follows:

OP = B – SP – OR – A

where OP is operating profit, B is revenue, SP is cost, OP is operating expense, A is depreciation.

In some sources you can find the statement that operating profit and EBIT are the same thing, but this is a misconception. These indicators are calculated before taxation, however, when calculating EBIT, not only expenses from operating activities are taken into account. While the operating financial result does not include investment income, including funds received from subsidiaries.

When making decisions, creditors pay attention exclusively to the calculation of operating profit, since it is this profit that shows the efficiency of the company’s main production.

Balance sheet

Balance sheet profit represents the income that the company received from sales of its main activity and others.

The calculation formula is as follows:

BP = B – SP – PR + PD

where BP is balance sheet profit, PR is other expense, PD is other income.

This type of income can be calculated using the gross profit indicator, reducing it by other expenses and adding income from other sources. The data for the calculation is taken from the financial results statement.

From sales

An important indicator of a company's performance is profit from sales, since revenue is cleared from the costs of selling products and paying executives.

The calculation looks like this:

Profit from sales = B – Kr – Control

where Кр – commercial expenses, Ур – administrative expenses.

This type of company income is adjusted by reducing costs or increasing the volume of product sales on the market.

Taxable

According to the Tax Code of the Russian Federation, entrepreneurial activity is subject to taxation, in connection with this, in financial accounting there is such a category of profit as taxable income. During the calculation process, this type of income is reduced by the level of expected benefits for a particular type of activity.

Calculation formula:

NP = VP – SVP – I – A + PR

where VP is gross profit, SVP is adjusted VP, I is costs, A is depreciation, Pr is asset growth.

Marginal

This type gives an idea of the company’s coverage of fixed costs and the formation of net income, calculated as:

M = V – PZ

where B is revenue, PZ is variable costs.

If a company produces different types of products, this type of profit will help identify the most profitable ones in terms of profitability.

Unallocated

Retained earnings are reflected in the balance sheet and represent income that has not been distributed by the owners of the company. In the Russian accounting system it is accounted for on account 84.

Calculated using the formula:

NP = NP + D – Div

where NP is retained earnings, D is income of the current period, Div. – dividends.

Retained earnings are part of the company's equity and indicate that shareholders did not use these funds to replenish assets.

Estimated

Estimated profit is calculated based on upcoming expenses and income for the company's economic activities. According to the legislation of the Russian Federation, the calculation of estimated profit is carried out as a percentage and has the form:

Ni = (SP - W) x 100%

where SP is the expected profit, Z is the costs.

The estimate is drawn up when concluding contracts with the customer; unforeseen expenses are not taken into account as part of the profit.

Economic profit

This type of profit is a financial result that remains at the disposal of the organization after taking into account all expenses and paying tax obligations and the income received.

EP = TR – TC

where TR is the income received, TC is the sum of all expenses.

When calculating economic profit, all expenses are taken into account, including long-term ones.

Algorithm and formulas for calculating net profit

The ultimate goal of any commercial activity is to make a profit; the absence of this indicator leads the company to exhaustion of its resources and bankruptcy. Positive dynamics, on the contrary, allows you to replenish working capital, form reserves and develop production.

Calculation net profit carried out on the basis of the financial results statement. The calculation algorithm is that variable costs are subtracted from sales revenue, resulting in marginal profit. We reduce by fixed expenses, we get operating profit, the reduction of which by other expenses gives profit before tax. At the end of the calculation of net profit, the indicator is reduced by tax and other contributions to the budget.

Russian accounting practice also applies formula definitions of net profit:

PP = FP + VD + OD – N

where FP is profit, VP is gross income, OP is operating income, N is taxes.

Currently, companies that cooperate with foreign countries use financial accounting international standards, according to which net profit is formed as:

+ Tax expenses
– Income tax that is refunded
(+ unforeseen expenses)
(– unexpected income)
+ Interest payable
– Interest receivable
= EBIT
+ depreciation
– Revaluation of assets
= EBITDA

The distinctive features of EBITDA and net profit indicators are discussed in the following video:

The procedure for calculating the rate of return

The rate of return is the ratio of profit for the reporting period to the advance payment at the beginning of the period, otherwise it is called the rate of return on assets or investments.

This indicator is calculated as:

Np = Pv / Yes x 100%

where Yes – advanced funds; Pv – profit.

Advances are the sum of production costs and labor costs.
In other words, the rate of return is the level by which the invested capital in the enterprise has increased at the reporting date. Its standard value is considered to be 50%; excess profit is 100%.

The rules for calculating profit are outlined in this video:

Analysis of the results obtained

To analyze the obtained net profit results, it is used a number of methods:

vertical and horizontal the analysis is carried out on the basis of changes in reporting items;
trendy allows you to track changes in the indicator over time, comparing the reporting period with the previous or base one.
factorial, this method is based on the calculation of coefficients.

At a certain price level, a decrease in costs leads to an increase in income, i.e., the reverse side of production costs is profit. The lower the costs, the greater the profit and vice versa.

Quantitatively, profit is the difference between income from sales of products and the total costs of its production.

By economic nature, profit is a converted form of net income. The source of net income is surplus and, to a certain extent, necessary labor. Since net income is a distribution category, it can therefore be defined as the realized excess of the value of a product over production costs.

As a result of the deviation of the price of a product from its value, net income does not quantitatively coincide with the value of the surplus product. The isolation of producer costs, which take the form of cost, determines the isolation of income, which takes the form of profit.

A. Smith considered profit, on the one hand, as the result of the worker’s labor, since the value that he adds to the cost of materials is divided into two parts: payment for his labor and the profit of the entrepreneur. On the other hand, A. Smith considered profit as a result of the functioning of capital.

D. Ricardo believed that the amount of profit depends on wages: profit increases if wages decrease. One of the main factors in increasing profits is social productivity of labor, which, as it increases, leads to a decrease in the cost of labor.

According to K. Marx, profit is a transformed form of surplus value, that is, profit is a function of advanced capital. The separation of capital expenditures in the form of production costs leads to the fact that surplus value begins to represent an excess of the value (price) of a product over production costs and appears in the form of profit (p).

Many Western economists, when explaining profit, use the theory of three factors of production by J.B. Say, according to which labor, land and capital take part in the creation of value. Profit is income from the use of means of production (capital) and as payment for the work of the entrepreneur in managing and organizing production and, thus, distinguished between income on capital and entrepreneurial income.

Criticizing the theory of factors of production, K. Marx substantiated the position that new value is created by living labor. However, labor productivity depends on the technological equipment of production, fertility, location of land, etc. Consequently, capital and land contribute to the creation of greater value.

Since there were no truly market relations in the former USSR, the attitude towards profit was corresponding. It was believed that it could be established by adjusting prices and tariffs. Since the price was actually considered as an administrative standard, profit was also a product of rationing. Until the beginning of the 60s of the twentieth century. The prevailing idea was that it was enough to include profitability in the price, as the ratio of profit to cost at the level of 4-5%, and pricing was carried out in practice accordingly. In the 60s, profitability of up to 15% began to be included in the centralized price.

In a modern market economy, profit and the rate of return are the main guideline and at the same time an indicator of the state of production, a criterion of its efficiency. The rate of profit shows the efficiency of using all capital and the degree of its increase. In modern conditions, the annual profit rate of industrial corporations in the USA is 11-13%, in Western Europe - 8-10%.

Profit– this is the difference between the amount of sales (gross revenue) from the sale of products and the total cost of production.

P = C – S/S or (10.8)

р = W–K (10.9)

Enterprise profit– this is the difference between monetary proceeds (wholesale price of the enterprise) from the sale of products (works, services) (C) and their full cost (C/C).

The profit of an enterprise received from the sale of products (works, services) and adjusted depending on other income (+) and losses (-) is called balance sheet profit.

P B = C – S/S (10.10)

Since January 1, 1991, in Ukraine, not marketable products, but sold products have been used as a calculation indicator. Therefore, the mass of profit from sales is determined as the difference between the volume of products sold (without turnover tax) and the full cost of products sold (production and sales costs).

Since 1993, instead of turnover tax, the value added tax and excise taxes have been used.

The part of book profit that remains after paying taxes and other payments is called net profit.

P Ch = P B – taxes, mandatory payments (10.11)

Basic ways to increase profits enterprises:

Increasing revenue from sales of products (works, services) based on increasing the production of marketable products, improving their quality and selling price.

Reducing production costs.

The balance sheet and net profit of an enterprise in general reflect the final results of business and are the main indicators of the economic and financial activities of the enterprise.

Gross income of the enterprise– the difference between revenue from sales of products (V) and the fund for compensation of spent means of production (FV):

VD P = V – PV, or (10.12)

the amount of the wage fund and balance sheet profit of the enterprise:

VD P = FZP + P B (10.13)

The totality of the wage fund and the net profit of the enterprise forms the commercial income of the enterprise, which is at its full disposal.

From the point of view of the financial capabilities of an enterprise in expanded reproduction, it is necessary to take into account the reproductive efficiency of the enterprise. The total reproduction effect is the indicator of the enterprise's gross income (VD P), and the final reproduction effect is the indicator of the net product (P P).

Thus, gross income and net profit are the sources of formation of accumulation and consumption funds, and their size, dynamics, structure of distribution and use determine the pace and efficiency of expanded reproduction of the enterprise.

Therefore, for an enterprise (firm), the issue of profit margin is important, but one should distinguish between absolute and relative profit indicators.

Absolute profit value expressed by the concept of “mass of profit”. The amount of profit in itself does not mean anything, so this value should always be compared with the annual turnover of the enterprise (company) or the amount of its capital. An indicator of the dynamics of profit, a comparison of its value in a given year with the corresponding value of previous years, is also important.

Relative profit indicator is the rate of profit (profitability), which shows the degree of return of production factors used in production.

To determine the efficiency (return on profit) of the current costs of an enterprise for the production of products (works, services), the indicator is used profit margins(P I), i.e. the ratio of book profit to the total cost of goods sold as a percentage. Its formula is as follows:

P B – mass of profit from sales of products (balance sheet profit),

C/C – full cost.

or
(10.15)

However, production efficiency cannot be judged only by mass and rate of profit. It is necessary to take into account intensive factors influencing the movement of profits. This:

growth in labor productivity as a result of saving living and embodied labor;

cost reduction;

quality of products (work, services);

capital productivity, i.e., the efficiency of use of production assets.

Therefore, the efficiency of an enterprise is largely characterized by a general indicator - the level of profitability, which is one of the basic indicators of production efficiency at the macro and micro levels.

Profitability is a quantitative determination of the ratio of balance sheet profit to the average annual cost of fixed assets and standardized working capital as a percentage. In the practice of economic activity of an enterprise rate (level) of profitability determined by the formula:

(10.16)

– rate of return,

– balance sheet profit,

– average annual cost of fixed production assets,

OS N – the cost of working normalized funds.

Therefore, the rate of return shows degree of efficiency (return on profit) of the production resources used. Profitability characterizes the level of return and the degree of use of funds in the process of production and sale of products (works and services).

Basic ways to increase profitability:

cheaper elements of advanced capital;

reduction of current production costs.

Ultimately, the condition for both is the widespread use of scientific and technical progress results in production, leading to an increase in the productivity of social labor and, on this basis, a reduction in the cost of a unit of resources used in production.

In a market economy, profit is the basis for the development of an entrepreneurial company. Western economic literature proposes several theories for optimizing a company's activities, but they are not based on the principle of profit maximization. Thus, according to one theory, the goal of a company should not be to maximize profits, but to maximize sales. The company is faced with the task of achieving and maintaining a certain level of profit for as long as possible. In this case, the company will focus on the industry average rate of profit, which is the result of intra-industry competition.

Profit rate is one of the characteristics of a company’s business activity and is used not only in forecast calculations, but also to assess the feasibility of investing in a company. Let's look at what this indicator is and how it is calculated.

Net profit margin: meaning

The net profit rate (or net profitability ratio) is the ratio of net profit to revenue measured as a percentage (Resolution of the Government of the Russian Federation of June 25, 2003 No. 367). That is, this indicator demonstrates how much profit is per unit (ruble) of revenue. Accordingly, it serves as a characteristic of the profitability (efficiency) of the activity being carried out.

It should be distinguished from other indicators profit margins(profitability), calculated from other bases, for example, from:

assets;
investments;
costs;
personnel;
capital.

Profit rate makes it possible to estimate the profitability of a business, which occurs after all associated expenses have been incurred and taxes due have been deducted. A value of this indicator ranging from 8 to 20% is considered good. The higher it is, the higher the profitability and efficiency of the business.

Real values profit margins to a large extent depend on the industry in which the activity is carried out and the specific operating conditions of a particular legal entity. If there is a loss or zero profit, this indicator is not calculated.

Profit Rate: Application

Profit rate can be used not only to estimate the amount of income received from each ruble of revenue, but also for other purposes, such as:

Regulation of selling prices.
Drawing up forecast calculations.
Assessing the effectiveness of business investments. At the same time, the definitions of one profit margins this will not be enough. Calculations of a number of other ratios will be required, primarily indicators of return on investment, capital, assets and costs. Profit rate is only one of the quantities determined in such an assessment. But, for example, interest rates on investment loans and borrowings will be compared with its expected value. And if these rates turn out to be higher than rate of return, such investments will be unprofitable.
Determining the feasibility of providing a credit or loan to a legal entity to replenish working capital. If these proceeds are entirely directed directly to investments in the cost of manufactured products or the purchase of goods for resale, then, while maintaining sales prices rate of return will show whether the person will be able to pay interest on the provision of these funds. If rate of return higher than the interest rate, then the probability of repayment of borrowed funds and interest on it is high. If the opposite situation occurs, then a refund may not be possible.
Assessment of investment attractiveness, a number of indicators for which, including the value profit margins, calculated over several years. A good characteristic would be sustainable growth profit margins.

Thus, rate of return of interest:

for owners;
investors;
banks and lenders;
management and financial and economic service of the legal entity itself.

It is also useful for the listed persons to know the value of liquidity ratios that characterize the entity. Read about them in the article .

Formula for calculating rate of return

Calculation formula profit margins represents the quotient expressed as a percentage (by multiplying by 100) by dividing the amount of net profit by the amount of sales revenue, free of taxes (VAT and excise taxes), for the same period.

In symbols, the formula looks like this:

Np = 100 x PE / Vyr,

where: Np - rate of return;

PE - the amount of net profit;

Vyr is the amount of revenue excluding VAT and excise taxes.

The data for calculation is taken from the financial results report. Its current form was approved by order of the Ministry of Finance of Russia dated July 2, 2010 No. 66n. Expressed through the line numbers of the full form of this report (Appendix 1 to Order No. 66n), the above formula will look like this:

Np = 100 x page 2400 / page 2110,

where: Np - rate of return;

2400 - line number of the financial results report, which shows the amount of net profit;

2110 - line number of the financial results report, which shows the amount of revenue excluding VAT and excise taxes.

A report on financial results can be prepared in a simplified form (Appendix 5 to Order No. 66n), in which line numbers are not indicated, but all the data necessary for the calculation is present.

With the names of the lines containing this data, the formula will look like this:

Np = 100 x Net profit / Revenue,

where: Np - rate of return.

If it is necessary to analyze the indicator in question for a number of previous years, it may be necessary to calculate it using the form of the financial results report that was in force before reporting for 2011 and was called the profit and loss statement. This form was approved by order of the Ministry of Finance of Russia dated July 22, 2003 No. 67n, and the line numbers in it had a different numbering.

With these line numbers, the formula looks like this:

Np = 100 x page 190 / page 010,

where: Np - rate of return;

190 - line number of the profit and loss statement, which shows the amount of net profit;

010 - line number of the profit and loss statement, which shows the amount of revenue without VAT and excise taxes.

Read about what other data you can get from the financial results report in the article .

Calculation of formula indicators

Indicators included in the financial results report rate of return formula, come from accounting data.

The revenue shown on line 2110 corresponds to the amount generated on the credit of account 90, minus the taxes (VAT and excise taxes) listed in the debit of the same account.

The amount of net profit can be taken as the balance of account 99 before the balance sheet reformation. In the financial results report, it is sequentially calculated from revenue (line 2110) by performing arithmetic operations with this amount using data included in each subsequent line of this report from certain accounting accounts:

In line 2120 - as shown in the debit of account 90, the numbers received from accounts 20, 23, 41, 43.
In line 2210 - as shown in the debit of account 90, the numbers received from account 44.
In line 2220 - as shown in the debit of account 90, the numbers received from account 26.
In lines 2310, 2320, 2340 - as equal to the income shown on the credit of account 91, minus VAT, if these incomes contain it.
In lines 2330 and 2350 - as equal to the expenses shown in the debit of account 91, minus the VAT amounts related to income shown in the debit of account 91.
In line 2300 - as equal to the amount written off from accounts 90 and 91 to account 99.
In line 2410 - as equal to the amount of income tax accrued according to the declaration and shown in the accruals on the credit of account 68.
In line 2421 - as equal to the difference between PNO and PNA, which ended up on account 99 from account 68.
In line 2430 - as equal to the difference between the credit and debit turnover of IT in account 77 (a positive value when credit turnover predominates and a negative value when debit turnover predominates).
In line 2450 - as equal to the difference between the debit and credit turnover of ONA on account 09 (a positive value when debit turnover predominates and negative when credit turnover predominates).
In line 2460 - as equal to the sum of other data (except for the above) present on account 99.

All values in the financial results report are reflected taking into account the sign: positive ones - in their absolute values, and negative ones - in parentheses. Thus, in order to get the final result in the form of a net profit value, you need to sum the values of all the listed lines, taking into account the sign that is indicated for them.

In a simplified form of the report, the definition of net profit will be similar and, through the names of the lines, will have the following form:

Revenue + ordinary expenses (with a - sign) + interest payable (with a - sign) + other income + other expenses (with a - sign) + income tax (with a - sign).

When using the old form of the report on financial results (profit and loss statement approved by Order No. 67n), the indicated line numbers of the current report will be replaced as follows:

2110 to 010;
2120 to 020;
2210 to 030;
2220 to 040;
2310, 2320, 2340 at 080, 060, 090;
2330 and 2350 at 070 and 100;
2410 by 150;
2421 by 200;
2430 to 142;
2450 to 141;
2460 for the line number additionally entered in the old report form.

Results

The net profit rate is an indicator that is quite important for assessing the investment opportunities of a business entity and the prospects for regulating sales prices. Its calculation is simple, but depends on the quality of the data involved in the calculation procedure.

This indicator demonstrates the growth rate of production assets. The functional purpose of the parameter is to serve as a criterion for the relationship between supply and demand in society, as well as a regulator used by monopolistic companies to set prices for the products and services they offer.

In essence, the rate of profit is an analytical category used in practice to assess the prospects of commercial activity and forecast its further development. Analysis of this characteristic allows us to draw conclusions about the competitiveness of the business, its efficiency and the need to reduce production costs.

The formula by which the rate of profit is determined not only reflects the current state of the enterprise and allows you to predict the expected increase in capital, but also helps to highlight the shortcomings and positive aspects in the organization of the company's activities. This indicator should not be confused with the marginal income rate. Despite the similarity of the calculation procedure, there are significant differences between them.

Factors Affecting Profit Rate

The rate of profit is directly dependent on 2 types of factors: intra-production and market. The first group includes the following indicators:

norms of surplus value;
composition of funds invested in the business: the lower the cost of elements of constant capital, the higher the indicator under consideration;
the turnover rate of funds invested in the process: the higher it is, the greater the income received;
a lot of profit;
the amount of production capital;
degree of cost rationalization and cost savings.

The first 3 factors are classified as general factors. They do not depend on the field of activity. The remaining criteria are classified as production aspects of a certain market segment. Their importance lies in the fact that they are reflected in the cost of products or services. And any reduction in cost leads to an increase in profits.

The price level and the presence of competition certainly influence the indicator under consideration. The current market situation sets the average rate of profit characteristic of a particular field of activity. It can vary significantly from segment to segment. However, this is only true for large-scale companies.

In academic economic works, a significant place is occupied by the theory of the tendency to a constant decrease in the rate of profit, regardless of the influence of factors such as the introduction of advanced production technologies or the political situation.

Calculation of profit margin

To correctly calculate this criterion, it is necessary to take into account all, even the most insignificant, expenses. They should include not only the costs of production, transportation of products, but also funds intended for payments to employees, taxes, etc. In addition, you need to add up all profits received from various sources and present it as a single value. As a result, these two parameters are compared as a percentage.

In practice, it is customary to use the rate of return calculated per year. When making calculations, it is necessary to remember that in some industries the turnover period of the capital advanced may exceed this period.

From the above, it is obvious that competent capital management comes down to maintaining such a structure and volume of working capital that allows you to fix the rate of profit at the highest possible level. An indicator in the 15-50% zone is considered acceptable. Values exceeding 100% are classified as excess profits.