Analysis of the composition and dynamics of the profits

As the final result of all activities of the enterprise, profit requires urgent attention. The reasons are many: the correct and full payment of taxes prior to the adoption of the most correct management decisions. Obviously, it is not enough just to collect information on earnings for several periods because it is necessary to perform. Perhaps most important to analyze the composition and dynamics of profit, on which we will focus in more detail.

The company's Profit consists of the profits from the sale of products, i.e. from operating activities, as well as from the difference of other revenues and expenses. Of course, it is possible to separately study the composition of profit in the context of primary and other activities, but it is much easier to analyze on the basis of the statement of profit and loss. Information that it presents, it is enough to analyze the composition and dynamics of the net profit. For this purpose, this report must first be explored in two directions: vertical and horizontal. Vertical analysis is the study of the structure, as in the process to determine the specific gravity of the individual indicators. Traditionally, the base is chosen, the resulting revenue. The structure is defined for several periods, and then examines the changes.

The Following type of analysis – horizontal. From its name it is quite obvious that a comparison of indicators over several periods. To determine the relative and absolute changes. As a relative indicator typically use the factors of the dynamics. With the help of this type of analysis identifies the main trends inherent in the dynamics of certain indicators: profits and factors influencing it. As for the factors, the analysis of the composition and dynamics of the net profit of the vertical and horizontal techniques are usually complemented with factor analysis.

Factor analysis of dynamics of profits is to identify the indicators having the greatest influence on her, as well as on specific quantitative estimate of the effect. To conduct a factor analysis, it is necessary to create a mathematical model which can describe the profit. Models can be quite diverse. Profit can be represented as the product of volume of sales on the difference between the price and unit cost. The simplicity of such models is due to the fact that it takes into account a small number of factors that affect profit. A more detailed model can be built on the basis of the report mentioned above, which reflects the order of formation of net profit. When using this model, note that this value depends on revenue, which in turn depends on the price and volume of sales. These factors should also be considered separately. Analysis of influence factors in this model can be made in any way suitable for the analysis of deterministic models, for example, by the method of chain substitutions.

Analysis of the composition and dynamics of the net profit will be incomplete if it will not follow certain conclusions. The importance of the findings is difficult to overestimate, because on the basis of their management decisions. The analysis may reveal a number of serious problems that require solutions. You may need to pursue a policy of more stringent cost control to reduce production costs, which negatively affects profit. In addition, can be defined disadvantages of pricing policies that are not conducive to maximizing revenue. You might need to look for ways to reduce the tax burden: the special tax regimes, incentives and the like. In other words, it is necessary to pay attention to those factors that adversely affect profit and then to make decisions that could reduce this influence. The same factors that influence positively, it is necessary to use more fully.