The concept of “profit” is crucial for any person who has chosen such an occupation as entrepreneurial activity. Perhaps today it is difficult to meet a businessman who would not have an idea about the meaning of this term. Without profit it is very difficult, and sometimes almost impossible to develop your own business. Moreover, this concept itself is ambiguous, because they share operating, marginal, balance sheet, gross and net profit. What is the difference between these indicators and how to determine them? How to calculate net profit? But first things first.
Profit classification
The concept of profit is heterogeneous. For its classification, a number of basic features are used. These include sources of formation, elements that form profit, type of taxation, time criteria, inflation indicators and others. Here it is necessary to stop in more detail and consider each separately.
Classification of profit depending on the source of formation implies its receipt from the sale of own goods and services, sale of capital goods or other fixed assets of the enterprise, as well as from other sources. Separation by forming elements - the use of a certain set of expenses and income in the calculation of profit. How to calculate economic efficiency?
As mentioned above, the tax system used is also taken into account. So, divide the profit into one that is taxed, and one that is not levied. With respect to time criteria, the profit for the current or previous period, as well as its forecasted volume, is classified. The inflation component also makes adjustments. Separate nominal and real profits. The second is the result obtained by adjusting the nominal value taking into account the level of inflation for a given period. Above were listed only the main criteria that are used in the classification.
Role in business management
How to calculate net profit? In any responsible business, the foundation is essential. And entrepreneurial activity is no exception to this rule. Net profit is the most important factor indicating the effectiveness of the organization and its prospects. What is this concept? Net profit is the amount of cash that remains at the disposal of the enterprise after paying salaries to employees, covering all necessary taxes and fees, and also closing the required liabilities to credit financial institutions. These resources are subsequently used to form reserve funds and other accumulations. In addition, net profit is often directed to the expansion and development of the business.
Revenue for a certain period
One of the main indicators of net profit can be safely called revenue for a certain time interval. It represents the sum of all cash that came to the company from the sale of goods and services, as well as financial or investment activities. It should be noted that the correct analysis of this indicator depends on the correct choice of the studied period and answers the question: “How to calculate profit?” If we are talking about production, especially mass production, it is better to choose a long period. For example, a year or a quarter.
But when analyzing revenue in a more “dynamic” business (selling goods and services) it is advisable to evaluate small time periods: a week or a month. In addition, it should be adjusted for the seasons during which certain goods and services may be in high demand among consumers.
Cost of production
An important criterion in the question: “How to calculate net profit?” Is also the cost of production. It represents the total cost of producing one unit of goods. This includes the cost of resources, staff remuneration, depreciation of equipment. In addition, costs associated with the need for storage and transportation of finished products are taken into account. By reducing costs, a significant increase in net profit can be achieved. At the same time, the quality of the manufactured goods should be strictly controlled. It should not deteriorate, otherwise the competitiveness of products will decrease, which will ultimately lead to a decrease in revenue.
Algorithm and calculation formula
How to calculate the net profit of the enterprise? First of all, you must select the reporting period for which it will be calculated. As a rule, a year, a quarter or a month is used as such a time interval. It should be borne in mind that short time periods make it possible to analyze the current state of affairs at the enterprise, as well as summarize its recent functioning. To identify the main trends in the development of the company and lay the foundation for planning its future work, longer reporting periods should be used.
How to calculate net profit? For this, it is necessary to determine the amount of revenue from the sale of products, their cost, operating costs, as well as the amount of taxes and fees. Then the formula will look like this:
PE = B - C - OI - N, where
B - revenue, C - cost, OI - operating costs, N - taxes.
In addition, when calculating net profit, it will be necessary to take into account investment income, cash received from the sale of own assets and other operations that are not related to the production of products, if such receipts take place.