The concept of gross profit. What is enterprise income

The key goal of any enterprise is to obtain maximum income. The level of income is constantly monitored by accounting and responsible employees based on various financial indicators. The most important indicator To determine a company's profitability is gross profit. We decided to look at what the gross profit of an enterprise is. , how it is determined, what it affects and what it shows.

Introduction

Gross or total profit is the total profit received by a company over a certain period of time. This indicator includes both the company’s production and non-production profits, that is, roughly speaking, the sum of all the money it earns.

It is necessary to distinguish different types arrived

This profit does not take into account various expenses for salaries for managers, business trips, contracts and other indirect expenses, but the cost of production is necessarily taken into account. Cost in in this case the technical one is considered, that is, the one that consists of direct production costs for the purchase of raw materials, electricity and salary for the working team.

There is no need to take into account production costs to calculate gross profit - it includes the administration salary and expenses for other activities not related to production.

How to calculate VP

As a rule, gross profit is calculated once a year - this is quite enough to study the effectiveness and efficiency of the policy. The formula for calculating gross profit includes two indicators: technological cost and revenue. It looks like the difference between these two indicators:

GP = TR – TC. Here GP stands for gross profit, TR stands for enterprise revenue (total revenue), TC stands for technological cost (total cost).

There is a second calculation option - using the balance sheet. In this form, our formula will look like 2100 = 2110–2120. These numbers are line numbers, here 2120 = TC, 2110 = TR, and 2100 = GP. In this way, profits can be calculated as quickly and efficiently as possible.

Gross profit includes only production costs

Let's imagine that we need to calculate the VP of the “Steel” workshop, which produces special bearings for cars. As we know, the gross profit of an enterprise is determined on the basis of accounting documents. We have research reporting.

We apply our formula and find that in 2014 our “Steel” received 550-120 = 430,000 VP rubles, and in 2015 - 380,000 - 65,000 = 315,000 rubles. It becomes clear that in 2015 the enterprise performed worse, so its VP decreased. The situation needs to be corrected, because if this indicator continues to fall, then soon there may be no profit at all. Moreover, it must be remembered that VP is not net profit, because it does not take into account a number of mandatory expenses. How to raise VP? There are two ways:

1. Increase revenue.
2. Reduce the technical cost of manufactured bearings.

Gross profit is usually calculated once a year and compared with the previous season

Why is this necessary?

So, you already know what VP is and how to calculate gross profit. Now let's look at why it is needed at all. This indicator plays an important role in analyzing the performance of companies with a small share of commercial/administrative expenses. Ideally, they should be about 5% of the total cost of the product. If the indicator is below this threshold, then it can be used for short-/medium-term planning. If the threshold is exceeded, it is necessary to include other indicators, including marginal profit.

Note: remember that VP does not show the real profitability of the company. This figure does not include many additional expenses incurred by the company. For example, expenses for marketing, salaries for managers and management, and maintenance of the administrative building.

Let's look at one more question - what is the difference between VP and marginal profit. First, let's look at the definition: marginal profit is the company's revenue from which variable costs have been subtracted. Gross profit is the difference between revenue and the sum of variable/fixed costs. Most companies have fixed costs, so VP is lower than MP. What are fixed costs? These include:

1. Rent for premises used, incl. land tax.
2. Company utility expenses.
3. Equipment depreciation.

Enterprise management depends on many factors - technical, financial, legal and social processes and phenomena, entrepreneurial intuition, experience of doing business in modern conditions market economy. The basis of any commercial activity is the desire to obtain the maximum possible profit without losing the quality of the products and with minimal risks for the enterprise. It is profit that is the final, final indicator of the efficiency of an enterprise, and it is profit that allows this enterprise to develop and optimize its industrial potential. In order to correctly and purposefully direct and regulate financial flows both within the enterprise and externally, you need to have a certain competence in the types of profit, its sources, classification and optimal ways for its further use. One of these types is gross profit, which will be discussed in this material.

Gross profit (GP) and cost

If the concept of profit includes the difference between expenses and income from the sale of goods or services, then gross is a characteristic of the effectiveness of the production and financial policies of the enterprise. So, gross profit is the difference between revenue from a product or service sold and its cost. It is important to note that, unlike net income, VP does not exclude variable and operating costs and income tax deductions. In formal expression, the gross profit is obtained in this way: VP = B-C, where B is the revenue for the goods sold, and C is the cost of the goods or services produced. Gross profit is the profit from the sale of a product or service minus its cost.

In order to correctly and objectively obtain the volume of gross profit of an enterprise, you must first determine all the cost items that include the cost of goods, including variables that were not determined and calculated in advance. So, according to the most common definition, cost is the entire volume of resources, expressed in monetary terms, that was spent on the production and sale of a product or service. Thus, only by having a complete picture of all the costs incurred by production for the production and sale of a product or service can one objectively calculate the amount of gross profit for a certain period of time.

Factors Affecting Gross Profit

Like any other financial category, LP is influenced by a number of factors. Conventionally, they can be divided into factors that depend on the activities of the entrepreneur and independent factors. The first category includes the dynamics of growth in production volumes and product sales, expansion of the range, work to improve the quality and competitiveness of products, cost reduction, optimization labor productivity and coefficient useful action each unit of human resources, maximum use production assets and capacities, regular analysis and, if necessary, revision of the company’s marketing strategy. The second category includes factors that cannot be influenced by business entities: geographical, natural, environmental or territorial conditions, legislative regulation, changes in government strategy in supporting business, international and global changes regarding the resource and transport provision of the enterprise.

If the second category of factors obliges the choice of a flexible and rapidly changing management strategy that would ensure the continued functioning of the enterprise without, or with minimal losses and costs, then the management of factors of the first category is quite within the capabilities of experienced and competent enterprise management.

By increasing the volume of production and sales of products, and thereby increasing trade turnover, the company contributes to the growth of its gross income; a directly proportional relationship operates here. Because great importance it is necessary to maintain the pace and volume of production at a stable level, avoiding a decrease, since it will inevitably entail a negative impact on gross income. It is important to note that it is extremely negative role have unsold product balances that could generate income, but for one reason or another become unnecessary ballast for the enterprise. Some managers sometimes use a strategy of discounts, additional goods at a reduced cost, or barter exchange of balances in order to maximize their implementation and return the expended capital to the working capital. Most often, such marketing steps do not bring gross income, but if positive result and there is, then minimal.

It is very important to influence the cost of production - use innovative technologies in production, the search for the lowest possible methods of delivering products to the buyer, the introduction and use of alternative and economical energy resources ultimately helps to reduce costs and significantly affects the gross profit of the enterprise.

One of the most important factors worth noting is the pricing policy of the enterprise - high competition in a modern market economy constantly stimulates the manufacturer to revise pricing. Here two categories of factors intersect, because state antimonopoly policy interferes with the pricing policy of an enterprise, on the one hand promoting healthy competition in the market for goods and services, and on the other hand, preventing the free setting of prices for a particular product. But you should not strive to constantly reduce prices to increase the company’s turnover - a stable and confident exchange rate will help you stay afloat, and this will in any case be better than a feverish increase in volumes in order to maintain a stable income.

Analysis of product profitability makes it possible to determine which product is worth making the maximum bet on, and the need to produce which products should be reduced or even limited. After all, it is obvious that the turnover of profitable products gives maximum gross income, thereby increasing the net profit of the enterprise.

During the operation of any production, over time, material reserves arise that are no longer used, or their use is impractical. This may arise due to illiterate management, or due to objective factors. In this case, in order to avoid losses that may arise due to the fact that the ownership of these assets and their further sale will be much lower than the costs of their acquisition, it is worth taking measures to sell them. The money received from the sale of fixed assets will also be part of the gross profit of the enterprise.

Another source for increasing gross profit may be non-operating income - incoming rent, interest and dividends on shares or deposits, fines and sanctions in favor of the enterprise and other sources.

Optimal distribution of gross profit

So, having sold products and received a certain amount of money, you need to use it correctly and constructively, without forgetting any of the expense items. Imagine a pyramid, at the top of which is the total gross profit, followed by various sources of expenses: rent for construction or production facilities, payment of interest on existing loans, various charitable contributions and funds, all kinds of taxes, and most importantly - net profit. Further, the net profit is also distributed into several groups - environmental funds and payments, selection, preparation and training of human resources, social funds for the creation of social infrastructure of both the enterprise and the state as a whole, personal income of the owners of the enterprise, and reserve cash savings.

The payout strategy gives a good effect wages staff, when they receive not only a fixed fee for their work, but, like the owner of the enterprise, a part of the income from the final gross income of the enterprise. Such payments are of a bonus nature and, as a rule, are made irregularly, most often at the end of the year or reporting period.

It is worth noting that all types of payments are divided into two categories - those whose minimum amount is fixed, and those whose distribution depends on the managers and owners of production. The first include different kinds payments for rent, interest, loans. The second category is more specific, since the volume of payments in charities or on social needs depends on the decision of the management apparatus, and therefore may not always be objective and useful. An increase in part of the businessman’s own profit, and therefore a decrease in expenses for other items, may further negatively affect the growth dynamics of the enterprise. This is primarily due to human factor, which plays a vital role in the production process - complete social package for personnel, developed social support and infrastructure significantly influence the level of labor productivity.

Thus, an objective and comprehensive approach to the distribution of gross income of any enterprise makes it possible not only for its subsequent development, expansion of production capacity and strengthening of personnel capabilities, but also contributes to a further increase in the net income of the enterprise.

Gross revenues and profits are used in developing a business's budget of income and expenses for the upcoming financial year. These indicators reflect the costs associated with the production cycle. Gross profit does not take into account the amount of administrative or selling expenses, so it can be used to make forecasts in the short and medium term.

What is gross profit in simple words

To determine this indicator, it is necessary to know the exact amount of the organization’s income and the cost of products sold. Gross profit is the difference between revenue receipts and expenses included in the actual cost of production. When calculating the total value, there is no need to separate out tax liabilities.

The indicator is formed by subtracting from the total income for a certain period of time such expenses as:

• production costs (payment of the cost of materials and raw materials, Maintenance equipment used);
• payment of bills for consumed electricity, water supply;
• wage.

Gross profit is the result of the company's activities, which is calculated with the frequency established by the accounting policy. Its value can be influenced by external and internal factors. What does the concept of gross profit of an enterprise include:

• income that was received after the sale of manufactured products;
• receipt of funds for services rendered or work performed;
• resources generated by logging farms;
• gross profit is not only revenue from main activities, but also profitable transactions under contracts for the sale of equipment and other own assets of the organization;
• amounts received into the company's accounts for shares purchased from it.

If gross profit has decreased, this indicates a decrease in the level of profitability of production, a drop in the level of labor efficiency, or the use of incorrect logistics. Preventive measures will include actions to reduce costs, promote goods in the target segment, and launch additional capacities to reduce average costs.

Gross profit and gross margin are different concepts. When calculating profit, variable and partially fixed costs are subtracted. Margin is characterized by focusing only on variable costs. Gross and net income differ in the amount of tax liabilities and fees payable. Net profit is calculated on the basis of gross profit by subtracting accrued taxes from it.

The statement that book profit is gross profit is incorrect. These terms cannot be identified. The value of gross profit can be found from account card 90. Balance sheet or taxable profit (gross profit is not used as a tax base) is reflected in accounting in the amount of account balance 99.

Gross profit (loss) in accounting and reporting

Summarizing the gross type of profit occurs through a comparison of the amount of debit and credit turnover of account 90, taking into account the breakdown of transactions by subaccounts. The resulting balance must be written off to account 99. The financial result can be a loss or profit (and gross profit - the difference between the debits and credits of one account). When a debit balance is formed at the end of the month, a loss appears, while credit balances indicate the profitability of the project. If gross profit is received, the posting will be in the format D90.9 - K99. At the end of each reporting year, all subaccounts under account 90 are closed.

When reflecting profit in reporting documents, negative indicators are entered without the minus sign. To indicate the unprofitability of an activity, the number is placed in parentheses. Gross profit is not shown in the balance sheet - there is no line for this. The report form requires entering data only on the part of the profit remaining undistributed on a specific date.

Gross profit does not appear on the balance sheet, but it can be seen in the report on Form 2. The convenience of this form is that it makes it possible to trace the chain of calculations. Gross profit in the income statement is shown on line 2100. The document template with codes clearly demonstrates the procedure for calculating the indicator using lines 2110 and 2120.

Gross profit of the economy and enterprise: calculation formulas

Efficiency level production cycles profitability can be assessed on the scale of one company or the country as a whole. In the latter case, the gross profit of the economy is used; the formula involves finding the difference between the value of GDP and the total costs of producers for the manufacture of products. The resulting total shows what profit residents received or what losses they incurred as a result of the sale of their goods.

What is the gross profit of an enterprise - the essence of the concept can be traced by the formula for calculating it:

Monetary valuation of products sold – Cost of goods sold – Production costs.

According to the report of Form 2, calculations are carried out according to the following scheme:

• Line 2110 – Line 2120.

The calculated gross profit does not show the real income of the business entity, but the basis for analyzing the structure of production resources.

The firm's gross profit allows managers to analyze the work of divisions of organizations with an extensive network of production or retail outlets. Let's look at how to calculate and compare this indicator.

You will learn:

• What does the term "gross profit" mean?
• What factors influence gross profit.
• What is taken into account when calculating gross profit.
• How to calculate gross profit margin.

The value of VP is interconnected with the development of production; it does not always realistically reflect the picture efficient work enterprises. It does not include, for example, logistics and marketing costs. Therefore, when forming the final budget, calculating one VP indicator will be too little.

Calculation of gross profit: formula, methods, examples

What affects the revenue of an industrial enterprise:

• technologies and specifics of goods production;
• fixed assets;
• intangible assets;
• issue of bonds and shares;
• sold products (services) of others structural divisions included in the general balance sheet (subsidiary farms, vehicle fleet).

The cost of such enterprises includes:

• cost of resources, raw materials, supplies and fuel;
• remuneration of employees;
• management costs;
• depreciation of fixed assets and intangible assets;
• overheads;
• delivery and logistics costs.

What determines the revenue of organizations selling goods:

• purchase price of products;
• paid services (delivery, warranty service and after-sales services);
• enterprise assets (securities and software).

The cost of commercial firms includes the following elements:

• cost of purchased products;
• delivery costs;
• remuneration of company employees;
• rental price of warehouse premises and retail outlets;
• product storage and preparatory work;

To determine gross profit, two parameters are used: revenue and technological cost of the entire volume of production (minus commercial and administrative costs). There are other methods of calculation. Let's name the most important of them.

Calculation of gross profit

Calculation for trading companies

Calculation of trade turnover

This technique is practiced retail businesses in the case when a single markup value is adopted for all products sold by them. Sometimes it is more convenient to calculate this indicator based on the company’s turnover figures. Trade turnover is the amount of revenue including VAT. To do this you should:

In addition, you can use another formula:

Balance calculation

As a rule, to calculate gross profit using the formula, indicators from the organization’s balance sheet, as well as the report on its financial activities, are used. This method is suitable for companies with simplified taxation system (simplified taxation system). Then the calculation algorithm looks like this:

Line 2100 = line 2110 – line 2120, where:

line 2100 – gross profit (taken from the balance sheet);

line 2110 – the amount of revenue of the enterprise being studied;

line 2120 – technological cost.

Example 1 (on balance)

Manufacturer JSC Intensiv produces and sells equipment for Agriculture. According to financial work enterprise over the past few years, its financial results are:

Calculation of gross profit of the enterprise OJSC "Intensive":

ETC shaft 2016 = 140,000 – 60,000 = 80,000 (rub.)

ETC shaft 2017 = 200,000 – 80,000 = 120,000 (rub.)

Calculations show that over the year the organization increased its income by 40,000 rubles, therefore, this year it will continue to implement the chosen policy while simultaneously searching for new areas of development.

Example 2 (for trade turnover)

The Yagodka grocery store has set a 35% markup for all products. Total revenue for the year reached 150,000 rubles. (in view of VAT).

The estimated premium is equal to: P(TN)=35%:(100%+35%)=0.26. In this case, the amount of the realized trade overlay (surcharge) will be 0.26 × 150,000 rubles. = 39,000 rub.

An example of gross profit calculation and analysis of the data obtained

Let's give examples of calculating gross profit for two enterprises and analyze the result. The Voskhod plant bakes a wide range of bakery products, has production facilities in the Moscow region and trades only in the capital region. The Zarya enterprise is located in Samara, has a similar specialization, but differs assortment .

Table 1. Gross profit of the Voskhod organization for the first half of 2016

The table shows that gross profit is steadily increasing every month and from 2,000,000 rubles. increased to RUB 3,300,000. Monthly growth factors are cost and revenue. In just 6 months, the company earned 23,400,000 rubles, while the cost of sales amounted to 7,600,000 rubles, VP - 15,800,000 rubles.

It turns out that on average the company’s gross profit every month reaches 15,800,000/6 = 2,600,000 rubles. This amount of income can cover other expenses: administrative, selling costs, credit interest.

If we compare only the absolute values ​​of VP, it is possible to analyze trends over the course of six months, but it is not easy to note the quality of the company’s work results. In this regard, we calculate the relative parameter, that is, gross profit margin as its ratio to the organization’s revenue. For all six months it was 67.4%, and every month this figure is approximately the same. But still, compared to the average for the half-year, in March-April there is a decrease, and in May there is an increase in the profitability of VP.

The determining factors for these values ​​are cost and revenue. As a result of the analysis (it is not included in this article), it was found that pilot sales of completely new products started in March. This caused an increase in revenue in this particular month, including subsequent ones. For this type of product, the cost of sales in March-May was increased, since the enterprise did not qualify for the scale of purchases in accordance with the contractual supplies at preferential prices for materials and raw materials. The situation changed in June.

Let's calculate the gross profit for the Zarya plant and analyze what happened.

Table 2. Gross profit of the Zarya organization for the first half of 2016

The second table shows that Zarya’s revenue is significantly lower than that of the Voskhod enterprise.

Average monthly revenue is RUB 1,900,000. (11.15:6). At the same time, during the first half of the year, differences in dynamics are visible. From the beginning of the year to April, revenue grows, and from May it begins to decrease. The same thing happens with gross profit. The average monthly total profit of the plant is 1,200,000 rubles. (7,1:6). From the position of the Zarya company, is this not enough or too much? This question can be partly answered after calculating the profitability of the VP. Its average value is 63.7%.

The enterprise carries out accounting according to the method of accrual of income (expenses). The shortened method was chosen for costing. Almost 64% of a firm's gross profit can be allocated to selling, administrative and other expenses.

This example demonstrates that over the course of six months, the absolute values ​​of EP showed unconditional dynamics, however, the calculation of relative characteristics revealed additional changes. Thus, despite the June drop in total profit, there is an increase in the profitability of VP over the same period. The determining factors for these changes are cost and revenue. As a result of the analysis (it is not included in this article), several justifications were found.

In February, the company purchased cheaper products (sugar, flour), and, in addition, the recipes of some assortment samples changed. In the following periods, the previous supplier returned, which was facilitated by poor quality cheap raw materials. The decrease in VP profitability in May was also caused by a change in production costs. The year before last was marked for the company with the introduction of a modern KPI system in order to motivate staff. And already in May, based on the results of the first quarter, the first bonuses were paid to employees of industrial lines. There was an increase in wages for production workers and an increase in the cost of sales.

Later in June, the plant lost some points of sale of goods and was unable to find replacements for them in advance. Revenue immediately fell, and the trade profile changed (sales of products with higher costs and lower margins). In general, there has been an increase in the cost of sales along with a decrease in the profitability of total income.

When comparing two examples, it is clear that the gross profit of the Voskhod company has a more stable average dynamics (RUB 2,600,000). The average VP of the Zarya enterprise is almost half as much (only 1,200,000 rubles). Its dynamics in the first half of the year are unstable, the market situation is more difficult or there is a lack of resources to regulate the current situation.

The average monthly revenue amounts are also different: for Zarya – 1,900,000 rubles, for Voskhod – 3,900,000 rubles. It should be noted that selective comparison of only absolute values ​​is not entirely correct. If the Zarya plant can increase its trade turnover in order to catch up with Voskhod in terms of revenue, will it be just as economically efficient? The answer to this question will be given by the VP profitability indicator. On average, for the Voskhod enterprise it is 67.4%, and for Zarya it is slightly lower - 63.7%. A difference of 4% can be decisive. Which means that Voskhod is currently more successful. He works and sells much more efficiently, maintaining the company's gross profit at a constantly high level, unlike the Zarya company.

• 3 “magic” indicators: how to analyze your sales channel in 15 minutes

What to consider when calculating gross profit

Any steps prior to calculating gross profit must be completed before taxes are assessed. When completing Form C-EZ, the total income will be counted along with the additional income.

Calculations are carried out taking into account the types of enterprises, namely:

• Companies selling goods, belong to the category Businesses that sell products. To determine gross income, you need to find the amount of net total profit. To do this, we use form C (point 3). To calculate net revenue, you should subtract all returns and discounts in the organization’s activities from the total amount of offsets. Then from net income (3rd line) we subtract the cost of goods sold (4th line). The final difference will be the company's gross profit.
• Companies selling services, are included in the Businesses that sell services category and provide only services (excluding the sale of goods). In this case, gross income is identical to the organization's net income. The calculation is made by subtracting the total of discounts and returns from gross income. Basically, enterprises specializing only in services calculate profits using this simplified scheme.

• Gross revenue. Every day at the end of the working day, you need to make sure that all data related to financial and credit receipts are correctly reflected in the reporting. The volume of receipts is controlled using existing cash registers. In addition, you need to open a separate bank account and learn how to work with invoices.
• Sales tax collected. The main thing is to make sure that your reports correctly indicate the amount of tax collected. Its essence is as follows. When state and territory sales taxes are collected from buyers (the government collects them from the seller), all funds claimed are added to the total gross income.
• Inventory(analyze the indicator obtained as of the beginning of the current year). It is compared with the amount of the final gross profit for the past year. In a normal situation, the indicators will be the same.
• Purchases. The amount spent on goods purchased by the entrepreneur in the course of his business for personal use or for family members is deducted from the cost of goods sold.
• Inventory at the end of the year. Check that the accounting of the enterprise's reserves is carried out in compliance with the rules and regulations. An indispensable condition for this is the choice of the right pricing methodology.

To confirm all inventory on hand, a standard inventory list, forms of which are sold in specialized stores, is sufficient. The form contains columns for indicating the quantity, price and value of each type of goods. The form provides space for entering information about the employee who assessed the goods and made calculations, and then checked their accuracy. These forms are proof that the inventory of inventory items was completed correctly in the absence of serious errors.

Download form act of inventory of inventories in transit , you can at the end of the article.

• Checking completed calculations. For organizations specializing in wholesale or retail sales, the recalculation is done quite quickly. All you need to do is find the ratio of gross income to net profit. The result obtained as a percentage reflects the difference between the cost of goods sold and the nominal price.
• Additional sources of VP. If the firm's gross profit is received from sources not related to its main activities, the income indicator is entered in line 6 of Form C and added to gross income. The total amount will show the total income of the entrepreneur. When Form C-EZ is used for reporting, profit is shown on line 1. For example, this type of income includes revenue received from tax refunds, offsets, commercial transactions with scrap metal, etc.

The practitioner tells

Gross profit in factor analysis of income statement

Artyushin Vladimir,

Vice President of Finance FS GROUP1

Conducting a factor study of profit and loss statements will help to estimate the exact amount by which net profit has changed due to certain reasons. Let’s say that in order to determine the losses of an enterprise’s VP due to a decrease in revenue and a decrease in sales profitability, it will first be necessary to calculate what the total profit could have been while maintaining sustainable profitability at last year’s level.

The difference between this conditional VP and the profit of the previous year will illustrate how much profit (VPv) in monetary terms the company lost (earned) as a result of a decrease in revenue.

The gross profit formula for calculation is:

VPv = VPusl – VPo, Where:

VPusl – conditional VP that could be received by the organization while maintaining last year’s profitability (this year’s revenue, last year’s profitability), rub.;

VP – last year’s gross profit, rub.

Using a similar formula, you can determine how a change in sales profitability affects the amount of total profit (VPr):

VPr = VP – VPusl, Where:

VP is the annual gross profit of the company for the reporting period.

What affects gross profit?

The components of gross profit and its size are affected by a number of important factors, listed below.

External factors:

• transport, environment, socio-economic conditions;
• level of foreign economic relations;
• cost of production resources, etc.

Internal factors can be divided into two types:

• first order reasons, which includes income from the sale of goods, operating profit, interest payable (or received), other non-operating income or expenses of the enterprise;
• second order reasons include the cost of production, the composition of goods sold, the scale of sales and prices set by the manufacturer.

In addition to the above reasons, internal factors include cases caused by violations labor discipline in the course of the work of economic entities (incorrect pricing, poor quality of products, violations in the organization of labor, financial sanctions and the application of fines).

Both types of factors (first and second order) directly determine the amount of gross profit. First-order reasons include components of gross income; second-order circumstances directly affect sales revenue and, as a consequence, the total profit of the company.

For further prosperity and increased profitability of enterprises, it is necessary to take a series of measures, namely:

• apply the LIFO (Last in First out) method to evaluate resources;
• reduce taxes due to the transition to preferential taxation;
• promptly write off the organization’s debts that are recognized as bad;
• optimize enterprise expenses;
• maintain an effective pricing policy;
• let in shareholders dividends to modify production equipment and improve product quality;
• develop standards for exercising control over intangible assets.

How is gross profit margin calculated?

In the process of a general analysis of the profitability of organizations, the characteristics of net and operating profitability are often used, but according to the technical methods of compilation, these are only derivatives of gross profit. In this case, the main expense items (often with a maximum share) are applied already at the stage of calculating gross profitability.

Gross profit margin (hereinafter referred to as GPR) is the rate of return (or percentage) on expenses associated with the production and sale of products. It is calculated using the generally accepted standard formula without using other modified calculation methods.

The composition of this indicator establishes the dependence of its value on the business area. For example, enterprises providing services (medicine, consulting, information and communication technologies) have a higher RVP than trade organizations. This means that the VP profitability index is essentially useless for cross-industry analysis. But when comparing economic entities in a certain field of activity, this parameter is an excellent way to assess their competitiveness. Especially if factor analysis of the coefficient is performed industrial enterprises. All major efficiency and growth programs are based on gross margin: raw material cost, scrap rate, labor productivity, marketing strategy (cost of sales) and other important components.

When calculating gross profit margin, serious attention should be paid to the Cost of Sales component. Figures taken from a similar line (No. 2120) of the F-2 accounting report (financial performance report) in some cases are completely unacceptable. First of all, the cost of sales must include expenses taking into account the scale of sales, that is, variable or semi-variable costs. This includes the cost of materials, wages to production workers (with all fees and taxes), additional costs (repair and depreciation of equipment, payment for electricity, and other items).

At the same time, some commercial expenses related to sales are also included in the cost price. A good example such expenses - bonuses to sales managers for the volume of goods sold.

It is taken into account in a completely different way depreciation. Since accountants have particular preference linear method accruals of depreciation expenses and RVP calculations are most often distorted. When a company shows an obvious jump in revenue growth, accounting for depreciation unchanged will artificially inflate the gross profit margin when sales increase, and exactly the opposite will happen when they decrease. A similar situation arises with rent. industrial premises(or equipment) and other costs that, by source or type of accounting, cannot be planned due to the scale of production and sales.

The correct calculation of the RVP is of cardinal importance for the formation of prices in a highly competitive market. Only reliable information about this indicator allows the owner (management) of a business to see the optimal selling price, taking into account the required profitability.

How is the firm's gross profit distributed? It compensates for fixed costs, debts, interest on loans, payment of taxes, and payment of dividends. That is why the analysis of the dynamics of an organization’s profitability should be carried out in accordance with the value of the RVP. Profitability indicators are not so high level are not entirely suitable for this purpose due to the increased influence in the calculation of the number of factors and the accounting strategy used.

When evaluating projects or researching a business in the growth stage, the gross margin index and its changes are used to predict the payback period.

The main disadvantages of the RVP coefficient are closely related to its advantages. Undoubtedly, it should be used in analytics along with other characteristics of financial stability and profitability, since it cannot take into account the capital structure and all costs of the enterprise. Its focus only on marginal productivity factors deprives the coefficient of its ability to comprehensively and relevantly evaluate the company.

Since the gross profit margin rating is significantly inferior to net and operating profitability, its function is often erroneously overestimated by certain groups of users of financial statements. In addition, there is always the possibility of distortion of the RVP by the accounting policy used. Of course, reduced level profitability indices may also be inaccurate due to accounting nuances, but are much less than the VP profitability indicator.

It turns out that the optimal degree of this coefficient is not easy to estimate. Its use for comparison with the parameters of other industry organizations increases the vulnerability of the index due to the lack of detailed data on the circumstances of the dynamics of RRP among competitors. And explanatory reports and audit findings do not always contain complete information for such an assessment.

Due to the lack of uniform standards for assessing gross profit margin, when considering the indicator, you should first find its target level. Most best option– calculation of RVP based on reports from the industry leader in the company’s field of activity. When the use of benchmarking is impossible for some reason, it is necessary to perform an empirical assessment and monitoring of the dynamics of the coefficient over the actual period of prolonged activity. The main reasons for fluctuations in RVP are a number of factors:

• changing the selling price without taking into account the dynamics of calculating production costs;
• change in the purchase price of raw materials(materials) or other important expense items;
• change in sales scale(if the cost contains fixed or semi-fixed costs that are not directly related to the accounting method). For straight-line depreciation, the reason is considered to be the consequences of accounting policies, and not the sales dynamics themselves;
• fluctuations in the renewal rate of stocks of raw materials, materials and finished products . You need to understand the real reason for the increase in costs associated with rising prices for raw materials. Thus, if an enterprise accounts for inventories using the FIFO method, an increase in inventory turnover will cause a drop in the profitability of the VP due to a decrease in the part of more inexpensive resources (in terms of procurement time) in the cost price. With constant inventory renewal, price changes depend entirely on the revision of contracts with suppliers. It must be emphasized that, contrary to possible negative influence an increase in this indicator to gross profit margin, for the business as a whole this increase is certainly a positive factor.

• 8 rules for competent management of enterprise cash flows

The practitioner tells

How to Increase Your Gross Profit Margin

Buvin Nikolay,

Financial Director of Liteko LLC

The company's focus on increasing gross profitability is associated with both positive business trends and negative ones - for example, a decrease in gross profit in some cases. I will list the main factors for the growth of gross profit margin:

Increasing the cost of sales by improving product quality (the marginal profitability of modernization should be greater than the current RVP indicator). Increasing the share of products sold with increased margins in gross revenue.

Reassessment of credit strategy regarding buyer discounts. At the same time, it is necessary to analyze the dynamics of the VP based on the results of changes in the CP.

Activation of purchasing activities in search issues as much as possible favorable prices and supply contracts for semi-variable and variable costs. Earned discounts for expanding the volume of purchases must be correlated with current financial market rates in order to avoid a negative net profit result for the sake of increasing the RVP due to the mobilization of additional current assets for financing.

Creation and implementation of direct cost management systems by creating a procedure for motivating personnel for offering useful initiatives to increase savings at different phases of production.

Factor analysis of the RVP index always attracts special attention from company owners, top management and the board of directors. For this reason, assessing the indicator may become more complicated, despite the elementary calculation formula, reliability and availability of data. The attitude of information users to the analytical theses provided to them should be taken into account. Let's say that experts can explain many of the reasons for the dynamics of RVP with the accounting policies of the enterprise (the impact of artificial adjustments). I advise you to avoid similar factors during the presentation in order to prevent misunderstandings by the audience and additional questions during the discussion that are difficult to explain without preparation.

As for forecasting gross profit margin, I would like to emphasize that this is often the main indicator of the profitability of a budget or business plan. This means that it must be calculated very carefully. In companies with a long history, the thoroughness of planning is supported by the actual results of past years. Newcomers can use the results of other industry leaders with similar SWOT analysis tools in their distribution.

The most important indicator in assessing the activities of an enterprise (especially production) is gross profit. When its core activity is unproductive, all other processes will also be unprofitable. When comparing the work of one company in different reporting periods, you need to take into account whether changes have been noted in its accounting area (methods of reflecting costs and revenue). The same algorithm applies when evaluating several companies. In addition to the absolute indicators of VP, it is rational to consider relative coefficients.

Carrying out commercial or financial activities, any enterprise is faced with the need to determine certain economic indicators. They are needed to analyze labor results and identify their profitability. One of the main indicators is gross profit.

Gross profit is the total profit earned before all deductions and deductions are made. That is, it can be defined as an indicator of the excess of income over all. Gross profit includes depreciation of fixed capital and income received from property

Profit is the final result of the enterprise's activities. However, at the end of the reporting period a loss may be incurred. It may be a consequence extra costs for production or lower than planned income from the sale of goods and services. Therefore, correct calculation of indicators is the main condition for profitable activity.

Some costs are compensated at the expense of profits and are not classified as distribution costs. The total costs of the enterprise, which are part of distribution costs and paid out of profits, are usually called They exceed distribution costs. This is the difference between economic profit and gross profit. Before calculating gross profit, it is necessary to determine distribution costs. The difference between and these costs is the gross profit. The economic profit of the enterprise will differ from the gross profit by the amount of costs not included in distribution costs.

Therefore, any enterprise must strive to obtain economic profit, which is the final indicator of the total income received. It shows that the company covers its production costs and is able to independently finance further development.

There are many indicators of enterprise profitability and profit values. It is determined in percentages and levels. But gross profit is one of the main indicators. It determines the level of income received from the main activity. This is the amount of income from property, including fixed assets, total income received from all operations not related to sales, from which all expenses incurred as a result of these activities have been deducted.

This indicator fully reveals the results of all the activities of the enterprise. As a result, it is possible to determine unprofitable and profitable business operations. This makes it possible for economic analysis and determining optimal development paths.

Economic analysis is very important in the activities of every enterprise, regardless of what services or goods it sells. Proper planning and organization of work depends on this. At negative indicator activities, it is necessary to identify problem areas, the costs of which exceeded the planned ones. Reducing the cost of products, that is, the costs of their production, is one of the ways to increase the gross profit from its sales. It is profit that makes it possible for further development enterprises, introduction of new technologies, installation of new technological equipment and rational use of material resources and labor. The correct additional investment of the profit received in the development of production pays off over time. The main thing is to be able to build manufacturing process rational and economically profitable. To determine the benefits of organizing production, there are indicators of gross