Return on sales formula standard value. Profitability - what it is, types and formulas, how to calculate and increase profitability. Standard values ​​of this indicator for Russia

One of the fundamental markers of activity productivity is, which is defined as an index of economic viability, demonstrating the level of effectiveness of the exploitation of production, material, financial, labor and other resources.

Return on sales

Profitability includes several fundamental indicators, including return on sales.

Return on sales is a measure that demonstrates exactly how much money from a sold product should be considered profit received by the company.

The calculation of profitability of sales is made for a certain time period and is expressed in. With the help of the latter, a company can effectively optimize its pricing strategy and costs directly related to its implementation.

This indicator is characterized by active alternation of periods of its increase and decrease. The reason for the intensive growth of the ratio can equally be an increase in profits, a decrease in sales volumes, and the simultaneous influence of these factors.

An increase in profits can be caused by an increase in prices, a decrease in costs, etc., as for a decrease in sales volumes, the reasons for this phenomenon may be different. If this process takes place after an increase in prices, then this is quite natural. If the reason is, for example, loss of interest in the product, then you should make adjustments to your activities.

Formulas and calculation features

The calculation of profitability of sales is carried out for the following purposes:

• Effective provision of profit control;
• Monitoring the development of the company’s business activity;
• Comparison with profits received by competing companies;
• Optimal determination of both profitable and unprofitable sales;
• Assessment of the share of production costs in the general sales process;
• Ensuring control over pricing policy;
• For other purposes significant for the commercial activities of the company.

To calculate return on sales indicators, we use various types profit received, and therefore this coefficient is calculated using several different factors.

However, they all basically contain an equation such as:

Рп=(П/В) *100%, where:

• Рп – return on sales,
• P – profit,
• B – revenue.

In most cases, profitability is based on three main values:

1. gross profit,
2. operating profit,

The algorithm for calculating gross profit involves dividing the latter by revenue and then multiplying the resulting result by one hundred percent - Рп= (Пв/В) * 100%, where:

• Рп – return on sales,
• Pv – gross profit,
• B – revenue.

Gross profit is determined by subtracting sales from revenue received. The indicated indicators are extracted from the Profit and Loss Statement (Form No. 2)

The algorithm for calculating operating profit involves dividing profit by revenue and then multiplying the resulting result by one hundred percent - Рп = (Mon/B) * 100%, where:

• Рп – return on sales,
• Mon - profit before tax,
• B – revenue,
• Indicators for this calculation are also extracted from Form No. 2.

The return on sales calculated using this formula shows what specific part is contained in the revenue received by the company minus the transferred and paid interest.

The calculation algorithm for net profit involves dividing net profit by revenue and then multiplying the resulting result by one hundred percent - Рп = (Пч/В) * 100%, where:

• Рп – return on sales,
• Pch – net profit,
• B – revenue.

The necessary indicators for this calculation, as in the above cases, should also be extracted from form No. 2.

Analysis

Profitability calculation

Regular analysis of the profitability of a company's sales allows for effective management of economic activities, improving the performance of the latter, increasing profitability, promptly responding to changes in market conditions, etc.

When carrying out factor sales profitability, it is necessary to comprehensively take into account the specific features of the influence exerted by profitability on such factors as: changes in the products manufactured by the company or the services and work performed by it.

The most effective method is to conduct analysis over several months or even years; this approach allows you to determine the general trend economic development company and identify its weaknesses.

When conducting a profitability analysis, it is necessary to be guided by such fundamental and at the same time fairly simple criteria (applicable to absolutely all companies, regardless of their type of activity) such as:

• Increasing profitability is a positive trend.
• Declining profitability is a negative trend.

To determine the presence of certain trends in changes occurring in the profitability of sales, it is necessary to establish such periods as reporting and base. For the latter, it makes sense to take performance indicators either for the past or for the period in which the company received maximum profit. Accounting for the base period is required to compare the profitability calculated in each of the mentioned periods.

Factors reducing profitability

Why is profitability declining?

A decrease in profitability identified during the analysis may be caused by trends such as, for example:

1. Outpacing the growth rate, the rate of increase in revenue - the reasons that initiated this trend can be, in particular, lower prices, structural changes in the sales range, and increased standard costs. To change the situation, an analysis of the company's pricing policy, cost control system, and assortment policy is required.
2. The rate of decrease in revenue outpacing the rate of decrease in costs is a trend that may arise due to a decrease in the level of . In this situation, a comprehensive analysis of the marketing strategy is required.
3. An increase in company costs - this trend can be caused by factors such as lower prices, increased standard costs, and structural changes in the sales range. In this situation, an analysis of assortment policy, pricing and cost control is required.

It should be taken into account that the decrease in profitability revealed during the analysis is clear evidence that the company’s competitiveness is falling and the level of demand is seriously declining. IN this kind situation, the company needs to develop a system of procedures to actively stimulate demand, improve the quality of products, as well as intensive development of new market sectors.

It should also be noted that if the results of the analysis lead to conclusions about a decrease in sales volumes or an increase in assets involved in turnover, then the methods for adjusting the current situation may well be sufficient to eliminate the causes.

However, if the main negative factor is a significant increase in costs, then all necessary corrective measures must be carried out with the utmost caution, since the source of cost reduction can end quite quickly. Therefore, in this kind of situation, the best option may be to reorient to the production of some other product.

Increased profitability

The situation of declining profitability cannot be considered acceptable and quite naturally requires correction, for which the company needs to take measures aimed at increasing profitability in every possible way.

To develop the right company strategy, factors such as:

• Fluctuations in market conditions
• Changes in consumer demand,
• Analysis of the activities of competing companies,
• Saving internal reserves.

After a comprehensive study of all the above-mentioned factors, it is necessary, based on the conclusions obtained as a result, to begin the practical implementation of the strategy and take specific actions designed to correct the situation.

The main actions aimed at increasing profitability include:

• Increase and modernization of production capacity.
• Comprehensive control over the quality of manufactured products.
• Development of an optimal marketing strategy.
• Reducing the cost of manufactured products.
• Proper motivation of personnel.

So, summing up all of the above, it is necessary to emphasize that return on sales indicators are one of the fundamental criteria for assessing the financial and economic activities of a company. To improve all indicators, it is necessary to properly analyze all existing achievements and identify factors that hinder further development. After all problems have been identified and the causes of their occurrence have been determined, measures should be carefully developed and taken to correct negative trends in the company’s development.

Write your question in the form below

In a general sense, profitability includes a set of indicators that comprehensively characterize the efficiency (profitability) of a business.

Profitability is always the ratio of profit to that object, the analysis of the influence of the effect of which needs to be clarified. In fact, the formula for return on sales on the balance sheet determines the share of profit per unit of the object in question.

Using the formula for profitability of sales on the balance sheet, you can find out with what degree of efficiency it is used equity(company assets), fixed and working capital, etc.

Return on sales shows what part of the profit is in the organization's revenue. In the analysis, return on sales is denoted by ROS (from the English returnonsales).

General sales return formula looks like this:

ROS = P / Qp * 100%,

Here ROS is return on sales;

P is the amount of profit;

Qп - sales volume (revenue).

Return on sales is a relative indicator, determined as a percentage.

Formula for return on sales on balance sheet

When calculating the profitability of sales on the balance sheet, information is taken from the report on financial results(form No. 2).

In this case balance sheet return on sales formula depends on the type of profitability that users need:

• Gross Profit Margin:

  ROS=p.2100/p. 2110 * 100%

• Operating profit margin:

  ROS=(p.2300 + p.2330)/p. 2110 * 100%

• Net profit margin:

Standard value of return on sales

When calculating the profitability of sales, there are no specific standards, since the average statistical values ​​of profitability by industry are calculated. Each type of activity has corresponding norm coefficients.

In general, the formula for profitability of sales on the balance sheet should provide a profitability standard ranging from 20 to 30%, which reflects the high profitability of the enterprise.

An indicator of up to 5% shows the company’s low profitability, from 5 to 20% - average profitability, a profitability rate of more than 30% indicates super-profitability.

Average return on sales by industry in our country:

• Agriculture – 10-13%,
• Mining - 25%,
• Construction – 5-10%,
• Trade – 7-8%.

Sales profitability analysis

The formula for profitability of sales on the balance sheet allows the administration of the enterprise to find out the degree of efficiency of the organization in the use of costs in the process of making a profit.

A cost-benefit analysis is needed in the following cases:

• Receipt and increase in profits;
• Control of company development;
• Conducting comparisons with competitors;
• Detection of profitable and unprofitable products, etc.

Examples of problem solving

EXAMPLE 1

EXAMPLE 2

Let's consider the return on sales ratio(ROS). This indicator reflects the efficiency of the enterprise and shows the share (as a percentage) of net profit in the total revenue of the enterprise. In Western sources, the return on sales ratio is called ROS ( return on sales). Below I will consider the formula for calculating this coefficient, give an example of its calculation for a domestic enterprise, describe the standard and its economic meaning.

Sales profitability. Economic meaning of the indicator

It is advisable to begin studying any coefficient with its economic meaning. Why is this coefficient needed? It reflects business activity enterprise and determines how efficiently the enterprise operates. The return on sales ratio shows how much cash from products sold is the profit of the enterprise. What is important is not how many products the company sold, but how much net profit it earned from these sales.

The return on sales ratio describes the efficiency of sales of the company's main products, and also allows you to determine the share of cost in sales.

Return on sales ratio. Calculation formula for balance sheet and IFRS

Sales return formula Russian system financial statements looks like this:

Return on sales ratio = Net profit/Revenue = line 2400/line 2110

It should be clarified that when calculating the ratio, instead of net profit in the numerator, the following can be used: gross profit, earnings before taxes and interest (EBIT), earnings before taxes (EBI). Accordingly, the following coefficients will appear:

Gross profit margin ratio = Gross profit/Revenue
Operating profitability ratio =EBIT/Revenue
Return on sales ratio for profit before taxes =EBI/Revenue

To avoid confusion, I recommend using a formula where the numerator is net profit (NI, Net Income), because EBIT is calculated incorrectly based on domestic reporting. The following formula for Russian reporting is obtained:

In foreign sources, the return on sales ratio - ROS is calculated using the following formula:

Video lesson: “Sales profitability: calculation formula, example and analysis”

Sales profitability. An example of a balance sheet calculation for Aeroflot OJSC

Let's calculate the return on sales for Russian company JSC Aeroflot. To do this, I will use the InvestFunds service, which allows you to receive financial statements enterprises by quarter. Below is the import of data from the service.

Profit and loss statement of JSC Aeroflot. Calculation of the return on sales ratio

So, let's calculate the return on sales for four periods.

Sales return ratio 2013-4 =11096946/206277137= 0.05 (5%)
Return on sales ratio 2014-1 = 3029468/46103337 = 0.06 (6%)
Return on sales ratio 2014-2 = 3390710/105675771 = 0.03 (3%)

As you can see, the return on sales increased slightly to 6% in the first quarter of 2014, and in the second it halved to 3%. However, the profitability is greater than zero.

Let's calculate this coefficient according to IFRS. To do this, let’s take financial reporting data from the company’s official website.

IFRS report of JSC Aeroflot. Calculation of the return on sales ratio

For the nine months of 2014, the return on sales ratio of Aeroflot OJSC was equal to: ROS = 3563/236698 = 0.01 (1%).

Let's calculate ROS for 9 months of 2013.
ROS=17237/222353 =0.07 (7%)

As you can see, over the year the ratio worsened by 6% from 7% in 2013 to 1% in 2014.

Return on sales ratio. Standard

The value of the standard value for this coefficient Krp>0. If the profitability of sales turns out to be less than zero, then you should seriously think about the efficiency of enterprise management.

What level of return on sales ratio is acceptable for Russia?

– mining – 26%
— agriculture – 11%
– construction – 7%
- wholesale and retail – 8%

If you have a low coefficient value, then you should increase the efficiency of enterprise management by increasing the customer base, increasing the turnover of goods, and reducing the cost of goods/services from subcontractors.

Managers of entrepreneurial projects are interested in the profitability of their business, since the initial purpose of its creation is enrichment. The correspondence of the resources expended to ensure production, expressed in monetary terms, and the result obtained determines the efficiency of the subject’s functioning. The main indicator that allows you to make a decision on the advisability of further work in the previous mode, or the need to adjust it, is the profitability of the enterprise. In economic calculations, the parameter is displayed in the form of coefficients.

Profitability parameters

About the enterprise efficiency parameter

Profitability is an indicator that allows assessing the economic efficiency of a subject entrepreneurial activity. It determines the degree of effectiveness of using the company's resources. For the analysis, it is necessary to separately take into account investments in the business for the allocated period, which are of the following nature:

• labor;
• industrial;
• material;
• monetary.

Gross Margin

Sales efficiency allows you to estimate the share of profit in the revenue received from the sale of labor results.

Another name for the indicator is known as rate of return. According to standard methods, the parameter is determined by calculation based on the net profitability in revenue. If it is necessary to determine the weaknesses of a business, it is recommended to divide income into gross, balance sheet and operating components.

Types of profitability

Gross profitability is an enterprise performance ratio calculated using the gross profitability parameter. It allows you to determine the profitability of sales based on gross profit. The parameter is determined by the private gross profit and revenue. It allows you to determine the number of kopecks of gross profit contained in a ruble of revenue.

Gross profitability, the formula takes into account the specific nature of profitability, allows you to determine the gross profit indicator displayed in the financial statements of operating results. Its value corresponds to the difference between revenue and total cost. Revenue in this formula is interpreted as the product of sales volume and selling price.

Operating profit margin

Operating profit is positioned as an intermediate value of return on sales and net profit. It allows you to determine the Return on Sales coefficient as a quotient of the parameter and revenue.

Types of profit

Operating profitability is the second name for the indicator of return on sales based on operating profit. It reflects the number of kopecks in a ruble per ruble of revenue. These components of the formula are determined on the basis of the items reflected in the financial report.

Read also: How to obtain an extract from the Unified State Register of Individual Entrepreneurs

Parameter Analysis

A decrease in the economic indicator indicates a drop in demand for the result of the labor of a business entity and a decrease in the competitiveness of its products. To stabilize the situation, the head of the enterprise needs to initiate measures to stimulate demand and improve the quality of the goods produced. As an alternative, it is possible to consider the option of entering into activities in a new market niche.

The trend of changes in the sales performance indicator is assessed in the dynamics of the base and reporting periods. The base period is the past time period in which the indicator showed high levels. It is necessary to ensure the possibility of comparing the parameter with the indicator accepted as the standard.

Determined in relation to net income, the economic indicator of the entity’s performance is calculated by the private net profit and revenue, determined by the volume of sales in monetary terms. Net profit is calculated as the product price per unit multiplied by production volume expressed in units of production. Net profit margin shows how many kopecks of net profit are in the proceeds received from the sale of labor results.

Profitability ratio

Any sales are carried out to achieve the same goal - making financial profit. But it is impossible to give an objective assessment of sales effectiveness without an indicator of their profitability.

What is profitability?

Return on sales, also known as the return on sales ratio, is a percentage expression of the share of profit from each ruble earned. In other words, return on sales is the ratio of net income to the amount of revenue from product sales, multiplied by one hundred percent.

Some entrepreneurs are misled into thinking that return on sales shows profitability relative to investment. cash. This is not correct. The return on sales ratio allows you to determine what amount of money in the volume of products sold is the profit of the enterprise minus taxes and related payments.

This profitability indicator shows profitability solely from the sales process itself. That is How much does the cost of a product pay for the costs of the production process of the product/service? (purchase of necessary components, use of energy and human resources, etc.).

When calculating the coefficient, such an indicator as the volume of capital (volume working capital). Thanks to this, you can safely analyze the profitability of sales of competing enterprises in your segment.

What does return on sales show an entrepreneur?

• The return on sales ratio allows you to characterize the most important thing for a company or enterprise - the sale of main products . In addition, the share of cost in the sales process is assessed.
• Knowing the profitability of sales, the company can control pricing policy and costs . It is worth noting that different companies produce goods through different strategies and techniques, which causes differences in profitability ratios. But even if two companies have the same revenue, operating expenses, and pre-tax profits, their return on sales will differ. This is due to the direct impact of the amount of interest payments on the total net profit.
• Return on sales is not a reflection of the planned effect of long-term investments . The bottom line is that if a company decides to change technological scheme or purchase innovative equipment, this ratio may decrease slightly. But it will regain its positions and surpass them if the modernization strategy was chosen correctly. By the way, if you want to improve your profitability, read the article “increasing profitability of sales.”

How to calculate return on sales?

To calculate the return on sales ratio, the following formula is used:

ROS– the English abbreviation Return on Sales, which translated into Russian actually means the required profitability ratio, presented as a percentage;

NI– English abbreviation Net Income, an indicator of net profit expressed in monetary terms;

N.S.– English abbreviation Net Sales, the amount of profit received from the sale of manufactured products, expressed in monetary terms.

Correct initial data and dry calculations will allow you to determine the real profitability of sales. The formula for return on sales is simple - the resulting result is an indicator of production efficiency.

An illustrative example of calculating profitability:

Unfortunately, the general formula for return on sales can only show the efficiency or inefficiency of a company, but does not answer the problem areas of the business.

Suppose, after analyzing profitability data for 2 years, the company received the following figures:

In 2011, the company earned a profit of $2.24 million; in 2012, this figure increased to $2.62 million. Net profit in 2011 was $494 thousand, and in 2012 – $516 thousand. What changes did the profitability of sales undergo in 2012?

The profitability ratio for 2011 is equal to:

ROS2011 = 594 / 2240 = 0.2205 or 22%.

The profitability ratio for 2012 is equal to:

ROS2012 = 516 / 2620 = 0.1947 or 19.5%.

Let's calculate the final change in profitability of sales:

ROS = ROS2012 – ROS2011 = 22 – 19.5 = -2.5%.

In 2012, the company's sales profitability decreased by 2.5%.

Here you can see that profitability decreased by 2.5% over 2 years, but the reasons are not clear until a more detailed analysis is carried out. It includes:

1. Examine changes in tax costs and deductions that are required to calculate in NI.
2. Calculation of profitability of a product/service. Formula:

Profitability = (revenue - cost * - costs)/revenue * 100%

1. Profitability of each sales manager. Formula:

Profitability = (revenue - salary * - taxes)/revenue * 100%.

1. Advertising profitability of a product/service. Formula:

*If you provide services, then the cost includes: organizing the workplace for sales managers (computer equipment, rent of sq.m., telephone equipment, utilities proportional to the person, etc.), their salary, telephone costs, advertising, costs for the necessary software (CRM, 1C, etc.), payments for a virtual PBX.

Let us immediately note that it is possible to use a simpler formula for return on sales: ROS = GP (gross profit) / NS (total revenue). But it is more appropriate for calculating “narrow” indicators (profitability for each manager, for a specific product, for a page on a website, etc.).

It is important to note that each manager may have a different sales structure: some sell only expensive goods and rarely, some sell small ones, but often - this is where the main difficulty will be in calculating net profit (margin after taxes). It is necessary to resort to the margin data of each product for each seller using CRM.

1. Calculation of sales volumes and margins. Perhaps profitability has fallen because... the most marginal product ceased to be sold.

We said above that part of increasing profitability of sales is reducing costs and expenses. But at the same time, we recommend that you be careful with this point because... Negative consequences may follow in the form of deterioration in the quality of goods (services) and a decrease in the efficiency of specialists. To avoid this, it is necessary to approach the issue of increasing sales profitability in a comprehensive manner! It includes studying: The table shows that, despite the fact that contextual advertising brought more money to the company’s bank account, its profitability is 3.7 times lower. This means that if managers sell websites poorly, but sell contextual advertising well, then a decrease in profitability cannot be avoided.

• Competitors
• Sales and Cost Structures
• Sales channels
• CRM uses
• Managers' effectiveness

After studying all this, you can move on to developing sales tactics and strategies. And only now make operational decisions.

In our other articles we will tell you how to:

And another important issue of sales profitability is calculating the profitability of each website page (group of pages) in order to understand the costs of attracting customers for each product (group of products). For example,

The real estate agency website offers: commercial real estate, residential and warehouse. To simplify the situation, let's assume that these are 3 different pages. Then the cost figure might look like this:

The completed data shows that it is possible to increase the costs of the offices page because they provide the greatest profitability for the business.

Calculating profitability for all layers is quite a labor-intensive task, especially if you have not done this before, and analysis is required over several months or even years (more than one week). And still, in the end, you may get an answer to the question “where are the strongest and weakest points,” but not understand what and how to do next. Therefore, we offer you our assistance in collecting, analyzing, developing recommendations, executing and monitoring the optimization of the sales department to increase business profitability.