Profit from sales of products and ways of its increase

The Goal of any business – is the result, in this case, in the form of profit. Need to know how it is calculated, to determine the profit from sales. Formally, it is calculated as follows: revenue from sales is subtracted the cost of sales, distribution costs and management costs.

The Company sells its products, receives proceeds, and to identify the financial results of the matches revenue with the costs of production and realization of the produced products ( services or work performed). In the economic literature discusses two approaches to determination of expenses (costs):

the economy

accounting.

The profit is considered on the basis of these two aspects.

Under the economic profit understand revenue minus total economic costs, which are explicit and implicit. It is a payment for uncertainty and risk and is the result of innovation and initiative of the entrepreneur.

Revenue minus accounting costs that are explicit – profit accounting.

Types of profit and its function.

For each enterprise three indicators:

1. Balance profit;
2. Profit that is taxed;
3. Net Profits.

Balance sheet profit – an important indicator, showing the financial condition of the company. Includes three elements:

1. Profit from product sales, which in the balance has the greatest share;
2. Profit received from realization of fixed assets, and other property;
3. Profits from non-operating transactions, taking into account the losses treated as financial results.

The Net profit is distributed to the following funds: consumption, accumulation, reserve.

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The Formation of profit can be presented in the following sequence:

1. Revenues from product sales;
2. Cost of goods;
3. Profit from product sales;
4. Profit from the sale of fixed assets of the company, other operations;
5. Non-operating income;
6. Balance profit;
7. Adjustment of profits;
8. Taxable income;
9. Income Tax;
10. Net revenue from sale of products.

Profit performs the following functions:

- demonstrates that the economic effect obtained as a result of economic activity;

- is a key element of the formation of financial (monetary) resources of the enterprise;

- thanks to profits is the formation of budgets of different levels.

Ways to increase profits.

The Increase its possible as follows:

- technical ways to increase, based on the improvement of production technology, the installation of modern equipment, and, as a consequence, improving the quality, and quantity of the products manufactured by the enterprise, respectively, should increase the volume of sales;

- organizational way, which is to improve the organization of production, labour organization and management;

economic profit improvement levers the following: material encouragement of the personnel for creative approach to work that ensures the growth of the enterprise, the growth of its business activity; formation of a competitive environment that fosters profits through the search and use of reserves, and the production of competitive products; promotion of enterprise through regulations.

More complete final results of the analyze business profitability. They show how well the company operates and how effectively, the revenues do various activities. Using these indicators, an analysis of sales volume, evaluation of activity of the enterprise as a whole, and also as a tool of investment policy and pricing. The value of profitability ratio demonstrates the effect of available and used resources.