Factor analysis of profit of the enterprise

The Financial result of the enterprise activities should be subject not only to strict accounting, but a detailed analysis. As you know, the financial result is the profit or loss, and the most effective method of study seems to factor analysis of profit of the enterprise. Let us dwell on the main aspects of this method.

Information about profit or loss commercial firms is reflected in the form of financial statements. In addition to the simple definition of profit margin for this report is to trace the manner of its formation, and the factors anyway influencing its value. Based on the statement of profit and loss, build mathematical models, through which is conducted the factor analysis of profit of the enterprise. If to include in a model all the data presented in this report, we will analyse the net profit of the company.

Particular attention should be paid to the fact that the report allows to estimate only the total change in revenues. The problem is that this indicator is in turn influenced by two factors: prices and sales volumes. The impact of each of them should be accounted for and reported on separately. For this calculation you will need to use information that is not presented in the study report. This refers to information about changes in prices for the company's products (the price index). After accounting for changes in revenues under the impact of prices is determined by its change under the influence of the dynamics of sales. Subsequent multiplication by the return on sales in the base period allows us to estimate the change has already arrived.

The Impact on earnings of the cost, as well as commercial and management expenses shall be determined by examining changes of their level. This level represents the ratio of certain expenses to the amount of revenue for the corresponding period. This level can be expressed in percentage or in ratio. In the future, should the amount of revenue for the reporting period multiplied by the difference calculated levels for each of the indicators. The result of the calculations will be specific quantitative effect of a factor. If the level was presented in percentages, the result is to be divided by 100.

Factor analysis of profit of the enterprise in the study of its changes under the impact of other income and expenses, and income tax you can spend by determining the absolute changes in these factors.

Analysis of the balance sheet profit of the company may be in a similar way. Obviously, because of the peculiarities of this index in his factor model will include a considerably smaller number of factors. In addition, this model can be represented in a different way, for example, as the product of volume of production and sales on the difference between prices and unit costs. This model can be analyzed by any suitable method. Most often resort to the use of the method of chain substitutions and modifications to it.

Factor analysis of profit of the enterprise is not the only technique that allows to study this most important indicator. In respect of statement of profit and loss traditionally produce vertical and horizontal analysis. The first is to study the structure of this report. As a base of comparison it is customary to use the proceeds, examining the specific weight of all other indicators involved in the formation of profit. Horizontal analysis is an analysis in time, that is, the study of the dynamics. Definition of absolute and relative changes of indicators allows to identify trends and to formulate the most useful management decisions.