Types of profitability

[gafimiv406]

The company's efficiency is assessed based on the profitability indicators of different parts of the business in total. Regardless of the object, when calculating profitability, the initial investments are always compared with the results they were able to bring. The investment attractiveness of the company can be assessed by knowing what the profitability ratios are:

assets - ROA;
sales - ROS;
investments - ROI;
project - Rп.
Return on assets
The company's assets are the composition and value of its property: buildings, production materials, equipment, funds, etc. To assess the efficiency of their use, the ROA coefficient is calculated. When the return on assets becomes negative, the company begins to operate at a loss. High coefficient values, on the contrary, mean that the assets are used effectively. ROA is the ratio of net profit to the value of assets:

ROA = P/CA × 100%,

where P is the profit received over a certain period of time; philippines whatsapp number database CA is the average price of assets listed on the company’s balance sheet during the same period.

Return on sales
ROS is an indicator that allows you to estimate how much money from the amount of products sold is the company's profit. It conveys the pricing policy of the business and its ability to control costs. The coefficient is defined as the ratio of net profit to revenue, the data for analysis has time limits:

ROS = NI : S,

where NI is net profit, S is revenue.

It is necessary to constantly monitor the profitability of sales. If ROS becomes lower over time, then the income from the sale of the product on the market is falling. In addition, this ratio can be used to calculate future profits if you know how much product the company plans to sell in a certain period of time.

Return on investment
Investments in a project can be very different, for example, external investments - a contribution to a startup, or internal - in conducting a marketing campaign. ROI allows you to understand whether a business is profitable or unprofitable: whether it is worth investing in it or accepting an offer to buy the company. With the help of ROI, you can get rid of ineffective investments in a business and choose the most promising tools for its development. For example, replace unprofitable outdoor advertising with targeted advertising on the network with a high payback rate. Return on investment is the ratio of the annual cash flow of the project to the amount of investment in it: