This is one of the most important economic indicators. Profitability measures how much profit we make for every dollar invested. With its help you can: assess whether it was possible to return the investment; see progress/regression compared to previous periods; compare with the industry average. Regular calculation of profitability helps to timely identify regressions in economic activity and adjust the strategy. Concept of profitability Profitability is an indicator of the efficiency of resource use. It can be calculated for any indicator of a company’s performance – material, labor or monetary. Thus, we can find out how great the return on costs for personnel.
Concept of profitability of sales
Return on sales is an indicator of a company’s financial Email Marketing List performance. Determines what portion of each dollar earned is the net profit for which the business was started. Return on sales shows how much the goods sold cover the costs of their production, including labor costs, the cost of components, and the use of energy resources. This is the most important indicator of the company’s potential, which is taken into account: Investors when evaluating startups and venture strategies to make decisions on their financing. Experts in stock valuation. Lenders when providing loans, debt restructuring. Owners of holdings when assessing and comparing the effectiveness of their own divisions.
How to calculate return on sales?
There is no universal indicator; each Bulk Lead industry has its own average value – it can be found on the official website of the State Statistics Service. The larger the company, the lower the acceptable level of the coefficient becomes. After all, the lion’s share of funds is spent on rent, a large staff and other expenses. Compared to previous periods, the profitability of sales should increase (with the exception of long-term investments). If it falls, this indicates a decrease in demand and competitiveness. The indicator is also influenced by seasonality and regional characteristics. Christmas trees in December will be more profitable than in summer, and the sales ratio of the average grocery store in Kyiv is higher than in Kherson.
