Analysis of the profitability of the organization
Questions: Analysis of income and expenses of the organization. The general scheme of evaluation factors and net income (loss). Cost-benefit analysis.
Analysis of income and expenses of the organization
Analysis of income and expenses is carried out on the basis of the statement of revenue and expenditure, which characterizes the organization's financial results for the period. The content of the statement of revenue and expenditure is regulated by IFRS number 1 "Presentation of Financial Statements".
In business and investment circles, it is used to determine the profitability of the investment value, credit organiza¬tsii. It provides information to investors and lenders with which they predict mo¬gut amounts of future cash flows. This report enables users of financial statements to forecast future cash flows in several different ways. Firstly, investors and lenders may use information report on revenues and expenditures for the previous assessment of the organization. Although past success does not mean success in the future, some important trends can be identified on the basis of historical data. Secondly, this report helps users determine the risk of failure op certain level of cash flows. Information on the various components of net income - income and expenses - emphasizes their relationship. With this informa¬tsiyu can, for example, to assess the impact of changes in demand for the products of organization, income and expenses of the organization (ie, net income). Separating operations from other activities, can Detect-live that is not visible at first sight, because the primary means of income is just operating activities. In the amount of net income often affect the organization's accounting practices. Napri¬mer, one organization takes into account the depreciation of production funds accelerated method, and the other uses a straight-line basis. Assuming that all factors odina¬kovy income first organization will be lower than the second, even though they do not differ substantially ni¬chem apart. Thus, the quality of the net income of the organiza¬tsii also important. Organizations that use liberal (aggressive) the accounting policies in the reports show a significant increase in net income in a short time pro¬mezhutok. In such cases, they say, that the quality of net income is low.
The net income or loss must include all recognized in the period income and expenses. An exception may be only those revenues and expenses that are so¬otvetstvii with the requirements of other accounting standards should refer to articles ne¬posredstvenno equity. Examples of such exceptions are the sum of revaluation or devaluation of fixed assets. Revenues and expenses are grouped in the statement of income and expenditure so as to identify the income (loss) from ordinary activities and extraordinary items. In this case, the concept of net income (loss) is based on the belief that any doho¬dy and expenses related to ordinary activities, because they reflect the risks faced by the organization, the leading case in certain political, economic and geo¬graficheskih conditions. Force majeure events and transactions are considered uniquely otlichi¬mye from ordinary activities. One of the features of extraordinary circumstances, as a rule, they are rare, non-recurring in nature. However, it is not necessary that all the events are rarely sluchayuschie¬sya for emergency situations. For example, the sale of subsidiaries associations for most organizations is not part of the event, but the event is seen as normal activities. The most common examples chrezvychay¬nyh circumstances - the earthquake, the expropriation of property, etc.
However, the allocation for emergency situations and even natural disasters politi¬cheskih depends on what the organization is for normal activities. For example, losses from the earthquake for the organization in earthquake-prone area shall be assigned to the results from ordinary activities, such as the risk of po¬ter - normal risk of doing business in a given geographical area. In the ordinary course of isolation is required to disclose certain income and expenses. This need arises when, due to their nature and / or size sve¬deniya of them are significant to explain the results of operations during the reporting pe¬riod. For example, separately represented income (loss) (sale of finished goods, works, and services) and non-core (sale of fixed assets, intangible ak¬tivov, foreign exchange, etc.) activity.
The general scheme of evaluation factors and net income (loss)
During the analysis examined the following items in the statement of income and expenses:
1) Income from sales of products and services. This article reflects on the operating income, which can be obtained from the sale of finished products, services, as well as fees, interest, dividends, rents and royalties, depending on the core business, net of VAT, excise and other taxes, and as the cost of the returned goods, discounts on sales and prices provided by the buyer;
2) Cost of goods sold and services rendered). Cost of sales (works, services) includes the actual costs associated with the production neposred¬stvenno goods (works, services) that gruppiru¬yutsya in accordance with their economic content of the following elements: material costs, labor costs, charges insurance, depreciation, and other costs;
3) Gross profit, which is a financial result of rea¬lizatsii goods (works, services) and is defined as the difference between the income from the sale of goods (works, services) and cost of sales of goods (works, services);
4) Income from financing. They may represent interest income on loans granted;
5) Other income. According to this article may be reflected income from disposal of other assets of the organization: fixed assets, intangible assets and financial investments;
6) The cost of sales of products and services.
7) Administrative expenses
8) Financing costs. They may represent compensation expense on loans received;
9) Other expenses. According to this article, can be reflected the costs associated with the disposal of fixed assets, intangible assets and financial investments; and other expenses;
10) Share of profit / loss companies accounted for using the equity method
11) Profit (loss) for the period from continuing operations. This article is the sum of gross profit, corrected for the amount of income and expenses recorded on articles 4-10;
12) Profit (loss) from discontinued operations
13) Profit (loss) before tax
14) The corporate income tax
15) Total profit (loss) for the period before minority interest
16) Minority interests. Minority interest - this is part of the net results and net assets of a subsidiary attributable to equity in its capital, which the parent company is not owned, directly or indirectly through subsidiaries. So if Company A owns 70% of the company B, then the minority accounts for 30%.
17) Total profit (loss) for the period
18) Earnings per share. This article shows the earnings per share, which shall be calculated in accordance with IAS №33 «Earnings per share".
Cost benefit analysis
Profitability - a relative measure that determines the level of profitability. Profitability characterizes the efficiency of the enterprise as a whole and the profitability of the various activities (production, commercial, investment). They are better than the profit characterizing the final results of management, because their value shows the ratio of the effect of cash or resource consumption. These indicators are used to evaluate the activity of the enterprise as a tool in the investment policy and pricing.
Profitability indicators can be grouped into several groups:
- Indicators characterizing production costs and return on investment projects;
- Indicators characterizing the profitability of sales;
- Indicators characterizing the return on capital and its parts.
The profitability of industrial activity shows how much the company has a profit from each tenge spent on production and sales.
Return on sales shows how much profit a company with sales of each tenge.
Return on equity characterizes how much profit a company with each tenge average cost of all capital invested.
Questions for self-control
1. Based on the data of the document analyzes the income and expenses of the organization?
2. What is the general scheme of the formation and evaluation of factors, net profit (loss)?
3. What is the relative measure of the level of profitability?
4. What characterizes the profitability of production activities?
5. What does the return on sales?
6. What characterizes the return on equity?
7. What factors influence the level of profitability of the organization?
8. What are the ways to increase the profitability of the organization?