Average profitability indicators by industry. Return on Sales (ROS). Formula. Calculation using the example of Aeroflot OJSC. Definition of Negative Profitability

Wholesale trade – 10.5%
- retail trade – 3.6%
- construction – 6.7%

We should also not forget about such a criterion as a relatively low tax burden, which is noticeably lower than the average level for all business entities in a certain industry.

This can also attract increased attention from tax authorities.

When calculating profitability, you need to obtain two important accounting indicators: return on assets and return on sales. Then the obtained figures must be compared with the average level of profitability for your type of activity (main). Industry profitability is always indicated in special directories that are regularly published by Rosstat.

- influence of competition, etc.

Average profitability and tax burden

Many are familiar with the concept of assessing the risk of a tax audit, as well as the dependence of the magnitude of this risk on factors such as the size of the tax burden, almost equal amounts of income and expenses of the organization, or payment of salaries, the size of which is below the national average. Among these factors is the profitability indicator in the enterprise statistics. It is no secret that if it seriously deviates from the level of profitability calculated by the Ministry of Finance for a given area of activity, this will inevitably entail an inspection by the Federal Tax Service.

Profitability by type of activity

The Federal Tax Service publishes average profitability indicators on its official website.

So, today the current figures are the following values:

Wholesale trade – 10.5%
- retail trade – 3.6%
- construction – 6.7%

Profitability indicators by industry should be taken into account when assessing the risk of a tax audit of your organization. When conducting on-site tax control, inspectors quite often pay attention specifically to the organization’s profitability statistics, so this criterion can also be used by taxpayers who want to adjust the results of their financial and economic activities in order to reduce the risk of coming to the attention of tax inspectors. A significant deviation is considered to be profitability that differs by more than 10% from the indicators of similar industries and organizations.

We should also not forget about such a criterion as a relatively low tax burden, which is noticeably lower than the average level for all business entities in a certain industry. This can also attract increased attention from tax authorities.

Average profitability

Experts consider the following to be significant factors influencing the amount of profitability:

Changes in the cost of raw materials;
- level of qualification of the workforce;
- too small or large markup;
- presence or absence of discounts;
- influence of competition, etc.

A significant deviation from the level of profitability established for a specific area of activity will attract attention from the Federal Tax Service.

As can be seen from the presented material, the areas of activity in which there was a decrease in the level of profitability for 2017 (compared to 2016) were identified as follows:

– wholesale trade;
– production of electrical equipment;
– production of vehicles.

Spheres such as construction and transport remained at the same level (a small percentage decrease in profitability).

Please note that a significant deviation of the level of profitability from statistical indicators (established for specific types of activities) will attract attention from regulatory authorities. Tax authorities take into account the deviation of the level of profitability according to the company (accounting data) from the industry average of no more than 10%.

Similar conclusions can be drawn about the impact of the tax burden on the ratio, since an increase in taxes (except for indirect ones in cases when the burden of the tax burden is shifted to buyers) leads to a decrease in both net profit and assets of the enterprise, and the return on assets ratio decreases with growth taxes are similar to the return on equity ratio (except for the increase in indirect taxes passed on to buyers).

It should be noted that the magnitude of the tax burden does not affect the volume of sales (i.e., the denominator of the coefficient), so the result of an increase in taxes is a decrease in net profit (i.e., the numerator of the coefficient) and a decrease in the profitability ratio.

Thus, an increase in the tax burden, leading to an increase in government revenues, causes a decrease in such important indicators of the financial stability of a commercial organization as various profitability ratios (with the exception of cases of growth in indirect taxes, which are reimbursed by buyers and in this case have virtually no effect on the profitability of enterprises).

Return on Sales Ratio in Excel

The level of economic efficiency of a financial, labor or material resource is characterized by such a relative indicator as profitability. It is expressed as a percentage and is widely used to evaluate the performance of a business enterprise. There are many types of this concept. Any of them is the ratio of profit to the asset or resource under study.

The essence of the concept of profitability ratio

The return on sales ratio shows the business activity of the enterprise and reflects the efficiency of its work. Evaluation of the indicator allows you to determine how much money from product sales is the company’s profit. What matters is not how much product was sold, but how much net profit the company earned. Using the indicator, you can also find the share of cost in sales.

The return on sales ratio is usually analyzed over time.

Profitability assessment

A rise or fall in an indicator indicates various economic phenomena.

If profitability increases:

An increase in revenue occurs more quickly than an increase in costs (either sales volumes have increased or the assortment has changed).
Costs are decreasing faster than revenue is decreasing (the company has either raised product prices or changed the assortment structure).
Revenue grows, but costs become lower (prices have increased, the assortment has changed, or cost standards have changed).

The first two situations are definitely favorable for the company. Further analysis is aimed at assessing the sustainability of this situation.

The second situation for the company cannot be called unambiguously favorable. After all, the profitability indicator has formally improved (revenue has decreased). To make decisions, pricing and assortment are analyzed.

If profitability has decreased:

Costs grow faster than revenue (due to inflation, lower prices, increased cost standards, or changes in product mix).
The decline in revenue occurs faster than the reduction in costs (sales have fallen).
Revenue becomes less, and costs increase (cost rates have increased, prices have decreased, or the assortment has changed).

The first trend is clearly unfavorable. Additional analysis of the reasons is needed to correct the situation. The second situation indicates the company's desire to reduce its sphere of influence in the market. If a third trend is detected, pricing, assortment, and cost control systems need to be analyzed.

How to Calculate Return on Sales in Excel

The international designation of the indicator is ROS. The return on sales ratio is always calculated based on sales profit.

Traditional formula:

ROS = (profit/revenue) * 100%.

In specific situations, it may be necessary to calculate the share of gross, book or other profit in revenue.

Formula for gross return on sales (margin):

(Gross profit / sales revenue) * 100%.

This indicator shows the level of “dirty” money (before all deductions) earned by the company from the sale of products. The elements of the formula are taken in monetary terms. Gross profit and revenue can be found on the income statement.

Information for calculation:

In the cells for calculating gross profitability, we will set the percentage format. Enter the formula:

The gross profit margin indicator for 3 years is relatively stable. This means that the company carefully monitors pricing procedures and monitors the product range.

Operating profit margin (EBIT):

(Operating profit / sales revenue) * 100%.

The indicator characterizes how much operating profit is per ruble of revenue.

((Page 2300 + Page 2330) / Page 2110) * 100%.

Data for calculation:

Let's calculate the profitability of operating profit - substitute references to the required cells into the formula:

Formula for return on sales based on net profit:

(Net profit / revenue) * 100%.

Net profitability shows how much net profit is per ruble of revenue. Both figures are taken from the income statement.

Let's show the return on sales ratio on the graph:

In 2015, the indicator decreased significantly, which is regarded as an unfavorable phenomenon. Additional analysis of the assortment list, pricing and cost control system is required.

A value above zero is considered normal. The more specific range depends on the field of activity. Each enterprise compares its return on sales ratio and the standard value for the industry. It’s good if the calculated indicator practically does not differ from the inflation rate.

Return to Profitability 2017

– wholesale trade – 10.5%
— retail trade – 3.6%
— construction – 6.7%

We should also not forget about such a criterion as a relatively low tax burden, which is noticeably lower than the average level for all business entities in a certain industry.

This can also attract increased attention from tax authorities.

— change in the cost of raw materials;

— influence of competition, etc.

Average profitability and tax burden

Profitability by type of activity

The Federal Tax Service publishes average profitability indicators on its official website.

So, today the current figures are the following values:

– wholesale trade – 10.5%
— retail trade – 3.6%
— construction – 6.7%

What percentage of return is considered acceptable?

Average profitability

Experts consider the following to be significant factors influencing the amount of profitability:

— change in the cost of raw materials;
— level of qualification of the workforce;
— the markup is too small or large;
— presence or absence of discounts;
— influence of competition, etc.

A significant deviation from the level of profitability established for a specific area of activity will attract attention from the Federal Tax Service.

As can be seen from the presented material, the areas of activity in which there was a decrease in the level of profitability for 2017 (compared to 2016) were identified as follows:

– wholesale trade;
– production of electrical equipment;
– production of vehicles.

Spheres such as construction and transport remained at the same level (a small percentage decrease in profitability).

Similar conclusions can be drawn about the impact of the tax burden on the ratio, since an increase in taxes (except for indirect ones in cases where the burden of the tax burden is shifted to buyers) leads to a decrease in both net profit and assets of the enterprise, and the return on assets ratio decreases with growth taxes are similar to the return on equity ratio (except for the increase in indirect taxes passed on to buyers).

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, and 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 the business activity of an 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. How is profitability calculated? Calculation formula for balance sheet and IFRS

The formula for return on sales according to the Russian accounting system is as follows:

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. Example of balance sheet calculation for Aeroflot OJSC

Let's calculate the return on sales for the Russian company OJSC Aeroflot. To do this, I will use the InvestFunds service, which allows you to obtain financial statements of the enterprise 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.

Report according to IFRS of JSC Aeroflot. Calculation of the return on sales ratio

For 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 trade – 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.

Calculating the standard value of return on sales for industrial enterprises and other organizations is extremely important in company management. Knowing these indicators, it is possible to conduct a qualitative economic analysis and improve the efficiency of the enterprise. If a company wants to maintain its position in the market or even improve it, then it is very important to carry out such calculations over short periods. This will not only allow the organization to be managed more efficiently, but will also provide the opportunity to promptly respond to any changes in the market.

Basic Concepts

Before you understand what the standard value of return on sales is, you need to understand what it is. In accounting, this concept means an economic indicator, by determining which one can determine the level of efficiency in the use of certain resources in an enterprise. Moreover, not only material assets are taken into account, but also natural and labor resources, investments, capital, sales, etc. In simpler terms, profitability refers to the level of profitability of a business, its economic efficiency and the benefits it brings.

Thus, it turns out that if the profitability indicator is below zero, then such a business is unprofitable, and we urgently need to improve this indicator, find out what influenced the occurrence of this situation and eliminate the causes of the problem. The level of profitability is usually expressed in coefficients, but is expressed for profitability of sales as a percentage. The standard value can also indicate the efficiency of exploitation of the enterprise's resources; with normal values, the organization will not only cover costs, but also make a profit.

Profitability indicators

When calculating all indicators, it is very important to pay attention to such a concept as the profitability threshold. This indicator, or more precisely, the period, actually stands for the division of the unprofitable and effective state of the company. It serves as a comparison to the break-even point, reflecting the point at which an unprofitable business became effective. To analyze the company's performance, it is necessary to compare actual profitability indicators with planned ones. In addition, the comparison uses data from past periods and indicators of competing companies. But the coefficients, or, as they are also called, sales indices, are determined by calculating the ratio of total income to fixed assets and flows.

Main groups of standards

The standard value of return on sales and profitability can be divided into certain groups, namely:

Return on sales (profitability of the enterprise).
Profitability of non-current assets.
Return on current assets.
Return on personal capital.
Product profitability.
Profitability of production assets and profitability of their use.

Using these indicators, taking into account the company’s field of activity, one can determine its overall profitability. To determine the return on assets, it is necessary to determine the efficiency of exploitation of the company’s equity capital or its investment funds: it all depends on how the company’s assets bring it profit, how much of it, taking into account the resources spent on production. To calculate the return on assets, the ratio of profit for a specific period of time to the size of the enterprise's assets for the same period is used. The formula looks like this:

R assets = P (profit) / A (size of assets).

The same indicators are used in economics to calculate the profitability of operating production assets, investments and equity capital. For example, a joint stock company, you can find out how effective the investments of shareholders in this industry are.

Profitability calculation

Return on sales (normative value) is an indicator of profitability, which is expressed in coefficients and is a display of the share of income for each cash equivalent spent. To calculate the profitability of a company's sales, the ratio of net profit to the amount of proceeds is calculated. Calculations are carried out according to the formula:

R cont. = P (net income) / V (revenue volume).

This indicator is directly influenced by the organization’s pricing policy, as well as its flexibility in the market segment where its products are used. To increase their own profits, many companies use various external and internal strategies, as well as analyze the activities of competitors, the range of products they offer, etc. There are no clear schemes, norms, or designations of profitability. This directly depends on the fact that the standard value of return on sales is directly related to the specifics of the organization’s activities. All indicators can only reflect the overall performance of the company for a specific period.

Basic formulas

In order to effectively manage sales and monitor the performance of the organization, calculations of the profitability of the enterprise are carried out. To do this, it is customary to use certain indicators, namely: gross and operating EBIT profit, balance sheet data, net return on sales. taking into account the gross income indicator, it shows a coefficient indicating the share of growth from each monetary equivalent earned. To calculate this indicator, take the ratio of net income after paying taxes to the total amount of funds for a specific period of operation of the organization. In other words, operating margin equals gross income divided by trading revenue.

It is worth noting that this coefficient must be included in the financial statements. But operating profit EBIT is equal to the ratio of EBIT to total revenue. Moreover, this indicator reflects the total income before all interest and taxes are subtracted from it. It is by this formula that the operating profitability of sales, the standard value in production, as well as other important values are calculated. It is believed that this coefficient is between the general profit data and the organization’s net earnings.

Profitability ratios

But the profitability of sales on the balance sheet is a coefficient, the calculation of which is carried out on the basis of data from accounting reports and represents a characteristic of the share of profit from the total revenue of the organization. This coefficient is calculated using the formula for the ratio of total income or loss from product sales to the volume of revenue. To get results, you just need to use ready-made data from the company’s balance sheet.

The calculation of net return on sales is carried out by the ratio of net profit after all payments to total revenue. To carry out independent calculations of the standard value of profitability of sales in trade, you need to find out how much product was sold and what income the organization received from this sale after paying all taxes, taking into account other expenses related to operating activities, but without affecting non-operating expenses .

Analysis of results

Thanks to all these formulas, company specialists can calculate a wide variety of types of profit relative to total revenue. But still, the dependence on the specifics of the main direction of the enterprise’s work remains quite significant. If the return on sales, standard value and other coefficients have been calculated for several periods of the organization’s activity, then the company’s employees will be able to make a qualitative economic analysis. That is, these indicators will help to conduct operational management of the economic activity of the enterprise. In addition, this will allow you to quickly respond to fluctuations and changes in the market, which will undoubtedly help improve performance indicators and provide the company with a constant income.

Indicators reflecting the standard value of profitability of sales are used in calculations of operational activities. But it is not worth using them for long-term periods, since changes in the market occur quite often, and with such calculations it will not be possible to respond to them in a timely manner. They will help solve daily and monthly tasks, helping to make plans for the sale of manufactured products.

Increased profitability

There are ways to increase the standard value of profitability of sales. Among them, the most common are the following: reducing production costs by reducing the cost of producing goods and increasing the volume of goods produced, which will increase gross revenue. But to effectively use these methods, the organization must have sufficient labor and material resources. Again, to conduct such events, you need to work with highly qualified employees or increase the level of professionalism of your staff through various trainings and using new methods and practices of the global economy that improve the skills of workers.

In order to increase the standard value of return on sales based on net profit, it is important to study what positions the organization’s competitors occupy, what their pricing policy is, and whether they are holding promotions or other attractive events. And already having this data, you can analyze which factors are advisable to use to reduce production costs. Moreover, for analytical activities one should use not only data about competitors in the region, but also use information about the leaders of a given market segment.

Conclusion

To increase sales profitability indicators, the standard value for industries must be calculated using all the necessary formulas and an analysis of the obtained data must be carried out. It is worth considering that increasing the efficiency of an enterprise is influenced not only by its pricing policy, but also by the range that it can offer to its consumers.

Most often, the best solution to reduce production costs is to introduce modern technologies into production. To understand whether this method will improve production, it is necessary to conduct an economic analysis and find out what costs are needed for this, how long it will take for employees to master new equipment, and how long it will take for this investment to pay off.

In November 2015, on the eve of the “Basic Strategies 2016” meeting, the Training Institute - ARB Pro Group of Companies conducted a study of managers of companies doing business in the Russian Federation. The study is devoted to the dynamics of the financial condition of companies, exports, actions to stabilize personnel, as well as investments, actions and plans of companies for 2016. More than 200 managers and business owners took part in the survey.

Download the results of the survey “Basic Strategies 2016”

Profitability of companies

One of them is the growing pressure on companies' profitability. The profitability of companies also shows a downward trend - in 2015, the number of companies with positive profitability decreased from 76% to 62%.

Profitability by industry

Profitability also varies significantly across industries. A larger number of profitable companies in the “Transport and Logistics” segments (83% of companies in the segment), as well as “Trade and Catering” - despite the reduction in retail turnover, companies manage to generate profits through effective management efforts. The least profitable companies among the survey participants were in the “Medicine and Pharmaceuticals”, “Auto Dealing and Auto Service”, and “Mining and Ore Processing” segments. It is likely that in these segments, a significant pressure on profitability was exerted by the depreciation of the ruble against key currencies and the purchasing power of the population. At the same time, we see successful examples and good prospects in the development of the medical services segment and the pharmaceuticals market with effective management.

The information was prepared by the Training Institute - ARB Pro Group of Companies based on a survey of top managers of companies doing business in the Russian Federation