The term profitability of each person, inany measure related to economic science, causes associations with the concept of the effectiveness of economic activity. If we take a more detailed approach to the meaning of words of profitability and efficiency, it is easy enough to draw the inference that these are two very similar concepts in their essence.
As a rule, profitability is aThe ratio of income and expenditure and is often expressed in percentages. From the point of view of economic efficiency, any type of commercial activity that is profitable can be characterized. The criterion of the level of profitability is one of the basic indicators of economic activity in economic analysis. Modern science distinguishes several types of profitability, and in some cases it is usually designated by the coefficient of profitability, or profitability.
Classification of this financial and economicThe indicator is arranged in relation to the object of the yield itself. In this case, for example, the return on assets and profitability of production, the return on investment and the profitability of sales can be calculated. But far from always profitability indicators reflect the real state of affairs of an economic entity in the short term. If we abstract away from amateurish reflections, then modern economic observers try to focus their attention on cumulative, or otherwise, gross indicators. Thus, the gross profitability shows an overall profitability estimate, expressed as a percentage. In the financial literature, the profitability of gross is considered as a comprehensive indicator of activity in the context of individual types of profitability. The gross profitability of sales is a kind of evaluation of the effectiveness of the business units of any organization.
A more concrete measure of effectivenesseconomic, can only be a net profit. The difference between these terms is the different calculation methodology, if profit is the difference between income and expenditure, then profitability is their ratio. Gross profitability - this kind of indicator of economic effect is often applicable to large investment investments. The return of global investment in various sectors of the economy is very difficult to calculate in detail for all types of profitability, since there is a high probability of not taking into account anything.
In the general sense of the word, the gross marginshould serve as an assessment of the economic efficiency of the enterprise, which reflects the rational use of labor, material, monetary and other resources. The analysis of profitability is carried out regularly in every normally functioning company. Its main goal is to identify both the least and most profitable aspects of the activity. Based on the results of such analysis, the line of the company's strategy is built in the long-term and short-term perspective. Gross profitability reflects the share of gross profit, which is per unit of revenue.
For a separate economic unit, whichhas a small staff and, as a result, insignificant financial flows passing through internal office work, it will be more appropriate to pay attention not only to such indicator as gross profitability, but also to all its separate types. In this case, you can identify weaknesses, which makes it possible to take timely measures to neutralize their impact on the final result of the activity, that is, the company's profit.
