Factors influencing profit briefly. Factors influencing the amount of profit
In market conditions, there are profit growth factors that are important to take into account during economic analysis. In the current situation, a negative feature for an organization is the growth of receivables and payables; it is the imbalance that has become an important factor in generating profit.
Based on the results of factor analysis, the quality of profit can be assessed. The quality of profit from core activities is considered high if its increase is due to an increase in sales volume and a decrease in production costs. Low quality of profit is characterized by an increase in sales volumes due to rising prices for products without increasing the physical volume of sales and reducing costs per ruble of products.
The constant factors influencing the profit of the organization are:
Changes in sales volume (affects an increase in sales volumes of profitable products, which leads to an increase in the amount of profit, and vice versa);
Selling price;
Number and composition of personnel;
Economic incentives for personnel.
Today, the profit analysis methodology does not sufficiently take into account the influence of an important factor - time. As a rule, this is done by discounting costs to profit, i.e. distribution of expenses at one point in time. When the state sets time limits on the payment of taxes, deadlines for the sale of products and the attribution of costs to the production process, the time factor becomes more and more versatile in the modern economy. Consequently, it is not time itself that influences the results of financial activity, but various factors of production and financial activity that manifest themselves in a certain period of time.
In a market economy, the main goal of any private organization is to make a profit. The profit of an organization is influenced by various factors, which can be divided into: external and internal.
External factors include natural conditions, government regulation of tariffs, interest, tax rates and benefits, and penalties. Such factors do not depend on the activities of the organization, but significantly affect its profit.
Internal factors are divided into production and non-production. Production factors characterize the availability and use of means and objects of labor, labor and financial resources. Non-production factors include sales and environmental activities, social working and living conditions, etc.
The main factors influencing the profit of an organization are the price of products, the level of fixed and variable costs, the influence of the state and competitors.
When setting a price, an enterprise must take into account the level of demand for a product, prices from competitors, the influence of the political situation, etc. An enterprise must set a price that will be acceptable to consumers, and, at the same time, sufficient to cover all expenses and make a profit in the amount necessary for the development and improvement of production.
The main sources of reducing the costs of production and sales of an organization's products include reducing the consumption of raw materials, materials, fuel and energy per unit of production; reduction of wage costs per unit of production; reduction of administrative costs and overhead costs; increasing the technical level of production; improving the organization of production and labor and changing production volumes.
To effectively manage an enterprise, in addition to studying the results of your activities, it is necessary to thoroughly study the activities of competitors and compare them with the results of your activities.
The methods of implementing state regulation of the market include the following types of policies: tax, investment, antimonopoly, financial, anti-inflation, foreign trade, etc. The profit of the organization is the main source of financing for the development of the organization, improving its material and technical base, and providing all forms of investment. All activities of the organization are aimed at ensuring profit growth or its stabilization at a certain level. A number of the above factors must be the subject of careful consideration and justification regarding the formation of profit. Without proper attention to this problem and each factor in particular, the effective operation and profitability of any enterprise is impossible. In order for Russian organizations to operate stably and make a profit in modern market conditions, we can propose the following main factors for increasing it:
Increasing production volumes and sales of products;
Implementation of measures to increase the productivity of its employees and the use of a system of employee participation in generating the organization’s profit;
Reducing production costs or applying modern cost management methods, one of which is management accounting;
Qualified implementation of pricing policy, since predominantly free (negotiable) prices operate on the market;
Competently building contractual relationships with suppliers, intermediaries and buyers;
Improving the marketing system at the enterprise;
Grouping your products based on profitability - focusing on those products that are highly profitable, improving products with an average level of profitability, and removing low-profitable products from production;
Organizing the production process in such a way that it is adapted to rapid changeover;
Constantly conducting scientific research into market analysis, consumer and competitor behavior.
To improve the efficiency of enterprises, it is of paramount importance to identify reserves for increasing production and sales volumes, reducing production costs, and increasing profits.
To determine the main directions for searching for reserves for increasing profits, we will highlight the factors influencing its receipt, classified according to various criteria.
External factors include:
Natural conditions;
State regulation of prices, tariffs, interest, tax rates and benefits, penalties, etc.
These factors do not depend on the activities of enterprises, but can cause a significant impact on profit.
Production factors are characterized by the presence and use of means and objects of labor, labor and financial resources and, in turn, are divided into extensive and intensive.
Extensive factors influence the process of making a profit through quantitative changes. Such changes include:
The volume of means and objects of labor,
Financial resources,
Equipment operating time,
Number of staff,
Working time fund, etc.
Intensive factors influence the process of making a profit through “qualitative” changes. Such changes include:
Increasing equipment productivity and quality,
The use of advanced types of materials and improvement of their processing technology,
Acceleration of turnover of working capital,
Improving the qualifications and productivity of personnel,
Reducing the material consumption of products,
Improving labor organization and more efficient use of financial resources, etc.
Non-production factors include, for example, sales and environmental activities, social working and living conditions, etc.
To summarize, it must be said that profit plays a decisive role in business activity and is one of the main indicators of an organization’s performance. It characterizes the possibility of innovative development, reconstruction and modernization of its production. Profit is defined as one of the goals of the activity and development of the organization, as a result of work, motivation, economic security and a quantitative measure of the success of the organization. An important point is not only the quantitative indicators of profit, but also its structure, longevity and quality.
Profit and profitability in the conditions of the formation of a market economy are the most important indicators of the economic activity of trading organizations and enterprises. These indicators reflect all aspects of the activities of trading enterprises: the volume and structure of retail trade turnover, rational use of resources, implementation of measures to improve organizations and technologies of trading processes, etc.
The amount and level of profit are formed under the influence of a large number of different factors that have both positive and negative influence on them. The number of factors that determine the amount of profit and profitability can hardly be clearly limited; it is very large. All factors can be divided into major ones, which have the greatest impact on the amount and level of profit, and secondary ones, the influence of which can be neglected. In addition, the entire set of factors can be divided into internal and external. They are closely related.
The amount of profit of an economic entity is influenced by factors related to its production activities and which are subjective in nature, and objective factors that do not depend on the activities of the economic entity (Table 1).
Table 1. Factors influencing the amount of profit
Profit from product sales also depends on internal and external factors.
Internal factors affecting profit and profitability include resource factors (the amount and composition of resources, the state of resources, conditions of their operation), as well as factors associated with the development of retail trade turnover.
These factors can be divided into three groups: production, commercial, financial.
Production factors are associated with the volume of production, its rhythm, material, scientific-technical and organizational-technical equipment, respectively, the quality parameters of the product, its range and structure, etc.
Commercial factors lead to financial factors and cover the concept of marketing in a broad sense: the conclusion of business contracts based on the closest study of current and future market conditions, price regulation of sales, its direction and organizational and economic support.
The reliability of the forecast of commercial factors is based, on the one hand, on risk insurance (mainly the risks of loss of property, disruption of deliveries, delay or refusal of payment), on the other hand, on attracting reputable, solvent clients. This, in turn, requires certain non-production costs (representation, advertising, etc.).
Financial factors, covering both revenue from the sale of products and services and business income from all types of activities, include, respectively: forms of payment (provided for by the contract or determined operationally); price regulation, including markdowns in case of slowdown in sales; attracting a bank loan or funds from centralized reserves; application of penalties; studying and collecting accounts receivable, as well as ensuring liquidity of other assets; stimulating the attraction of financial resources in financial markets. The principle “time is money” is important here: the faster and more complete the receipt of income, the more effective the entire activity.
Internal factors affect profits through an increase in production volume, improvement in product quality, increase in selling prices and reduction in production and sales costs.
The main external factors that shape the profit of a trading enterprise include the following factors:
Market volume. The retail turnover of a trading enterprise depends on the market capacity. The greater the market capacity, the greater the company's ability to make a profit.
Development of competition. It has a negative impact on the amount and level of profit, because it leads to an averaging of the profit rate. Competition requires certain expenses that reduce the amount of profit received.
The amount of prices set by suppliers of goods. In a competitive environment, price increases by suppliers do not always lead to an adequate increase in sales prices. Trade enterprises strive to work less with intermediaries, to choose among suppliers those who offer goods of the same quality level at lower prices.
Prices for services of transport, public utilities, repair and other enterprises. Increasing prices and tariffs for services increases the operating costs of enterprises, reduces profits and reduces the profitability of trading activities.
Development of activities of public organizations of consumers of goods and services.
State regulation of the activities of trading enterprises. This factor is one of the main ones that determines the amount of profit and profitability.
Factors influencing the amount of profit can be divided into two groups. The first group includes the so-called main factors that directly affect the volume of profit of a trading enterprise. These include:
Profit (loss) from the sale of goods.
Profit (loss) from non-trading activities of the enterprise.
Balance of income and expenses on non-operating operations.
Profit (loss) from the sale of fixed production assets.
The second group includes the so-called interdependent factors:
Sales volume of goods.
Retail prices for goods sold.
Distribution costs.
Employees' capital ratio.
Tax intensity of the enterprise.
Number of employees of the enterprise.
Turnover and capital composition.
Costs attributable to profit.
If we talk about the main factors influencing profit, then we can say that in practice gross (balance sheet) profit is mainly created due to profit from the sale of goods, but it can be increased (decreased) by the amount of profit from the non-trading activities of the enterprise, by the amount identified positive (negative) balance on non-operating transactions, by the amount of profit received from the sale of fixed assets (wherein profit (loss) from the sale of fixed assets is the difference between the sale (market) and their original price or residual value, taking into account revaluations caused by inflation If an excess of the initial cost and costs incurred associated with the disposal of fixed assets and other property is revealed over the amount of proceeds from sales, then the gross profit of the enterprise is reduced accordingly by the amount of this excess. If, on the contrary, the amount of revenue exceeds the initial cost and costs of disposal of fixed assets and other property, gross profit increases by this difference).
Interdependent factors, as well as the main ones, greatly influence the amount of profit. It is no coincidence that these factors received such a name. Their peculiarity is that each of them to some extent influences or is influenced by other factors from this group. Therefore, by dividing the subsystem of interdependent factors into separate indicator elements, it is possible to identify the degree of influence of each of them on profit based on the application of methods and techniques of economic and mathematical analysis. First, the impact of each of them on the amount of profit is assessed, and then their complex impact.
The growth rates of a particular indicator are calculated by their sequential ratio. The intensive development of a trading enterprise can be characterized not only by an increase in turnover and profits, but also by an increase in the productivity of sales workers, an increase in capital, etc.
For example, distribution costs in retail trade strongly depend on the amount of wages to employees and various contributions to extra-budgetary funds. A reduction in distribution costs entails a corresponding reduction in wages and various types of deductions. This, in its own way, can increase profit margins, but at the same time it can undermine workers’ incentive to work and greatly reduce labor productivity, which can lead to high costs for restoring staff performance. In foreign practice, a system of employee incentives is used in this regard, where, along with increasing salaries, the so-called participation of employees in the economic activities of the enterprise is used, which implies that employees have the right to purchase shares of enterprises at preferential prices, and then can receive dividends on the purchased shares .
It is assumed that the return from increasing labor costs should grow faster than the amount of payment. The enterprise distributes one or another part of the profit not in the form of cash payments, but in the form of shares or transfers it to the bank accounts of employees, forming a credit fund, which the enterprise puts into circulation, which to some extent reduces the need for borrowed funds, while reducing interest costs on bank loans.
The amount of profit in trade also depends on the volume of demand for goods and their supply. A decrease in demand for goods can lead to both a decrease in gross sales income and a decrease in gross profit. The regulator of the relationship between supply and demand on the market is the retail prices of goods. When prices for goods are low, the quantity demanded for them is greater, and when prices are high, less is demanded, since there are cheaper substitutes for these goods. As sales volumes increase, the profit margin increases, then its growth slows down, and finally it stabilizes or decreases, which depends on the properties of certain groups of goods.
Thus, profit is influenced by two interdependent factors: distribution costs and sales volumes of goods. Other factors also directly affect profits and each other.
Profit and profitability in the conditions of the formation of a market economy are the most important indicators of the economic activity of a construction organization. These indicators reflect all aspects of the activities of trading enterprises.
The amount and level of profit are formed under the influence of a large number of different factors that have both positive and negative influence on them. The number of factors that determine the amount of profit and profitability can hardly be clearly limited; it is very large. All factors can be divided into main ones, which have the greatest impact on the amount and level of profit, and secondary ones, the influence of which can be neglected. In addition, the entire set of factors can be divided into internal and external. They are closely related.
Internal factors affecting profit and profitability include resource factors (the size and composition of resources, the state of resources, the conditions of their operation).
Among the internal factors, the following factors can be identified:
1. Volume of products sold. With a constant share of profit in price, an increase in the volume of products sold allows you to receive a larger amount of profit.
2. Number and composition of employees. Sufficient numbers at a certain level of technical equipment of labor make it possible to fully implement the program of construction organizations to obtain the required amount of profit.
3. Forms and systems of economic incentives for workers. The influence of this factor can be assessed through the indicator of labor costs, as well as through the indicator of profitability of labor costs.
4. Labor productivity of construction organization workers. An increase in labor productivity, other things being equal, entails an increase in the amount of profit and an increase in the profitability of a construction organization.
5. Capital-labor ratio and technical equipment of workers. The higher the equipment of workers with modern means of labor, the higher their labor productivity.
6. Return on assets. With an increase in capital productivity, the volume of construction and installation work per 1 ruble of funds invested in fixed assets increases.
7. Amount of working capital; The greater the amount of working capital a construction organization has, the greater the amount of profit it receives as a result of one turnover.
8. Implementation of saving mode. Allows you to relatively reduce the current costs of construction organizations and increase the amount of profit received. By saving mode we mean not an absolute, but a relative reduction in current expenses.
The main external factors that shape the profit of a construction organization include the following factors:
1. Market capacity. The retail turnover of a trading enterprise depends on the market capacity. The greater the market capacity, the greater the company's ability to make a profit.
2. Development of competition. It has a negative effect on the amount and level of profit, as it leads to averaging of the rate of profit. Competition requires certain expenses that reduce the amount of profit received.
3. The amount of prices set by suppliers of goods.
All of the above should be the object of management attention on the part of the enterprise manager.
End of work -
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Profit is formed under the influence of a large number of interrelated factors that influence the results of an enterprise’s activities in different directions: some positively, others negatively. Moreover, the negative impact of some factors can reduce or even negate the positive impact of others. The variety of factors does not allow them to be clearly limited and determines their grouping. Considering that an enterprise is both a subject and an object of economic relations, it seems most important to divide them into external and internal.
At the same time, factors influencing profit are classified according to different criteria. Thus, external and internal factors are distinguished.
Internal factors are factors that depend on the activities of the enterprise itself and characterize aspects of the team’s work.
External factors are factors that do not depend on the activities of the enterprise itself. However, they can have a significant impact on profits. In the process of analysis, the influence of internal and external factors makes it possible to “clear” performance indicators from external influences, which is important for an objective assessment of the team’s own achievements.
In turn, internal factors are divided into non-productive and production.
Non-production factors include: organization of product sales, supply of inventory, organization of economic and financial work, environmental activities, social working and living conditions of enterprise employees.
The production factors presented in Fig. 5 (see Appendix 7) reflect the presence and use of the main elements of the production process involved in the formation of profit - these are means of labor, objects of labor and labor itself.
In the process of carrying out the economic activities of an enterprise related to production, sales of products and making a profit, these factors are closely dependent and interconnected.
Among the variety of external factors that can be found in modern literature, the main ones can be identified:
degree of political stability;
state of the state's economy;
demographic situation in the country;
market conditions, including the consumer goods market;
inflation rates;
interest rate for a loan;
state regulation of the economy;
effective consumer demand - the dynamics and fluctuations of effective demand determine the stability of receipt of trading revenue;
prices set by suppliers of goods - since an increase in purchase prices is not always accompanied by an adequate increase in selling prices. Retailers often compensate for part of the price increases by suppliers by reducing the share of their own profits in the retail price of goods. An increase in prices for the services of transport enterprises, utilities and other similar enterprises directly increases the operating costs of a trading enterprise, thereby reducing profits;
tax and credit policy of the state;
development of the activities of public organizations of consumers of goods and services;
development of the trade union movement;
economic conditions of business;
market volume.
Internal factors include:
volume of gross income;
employee productivity;
speed of goods turnover;
availability of own working capital;
efficiency of use of fixed assets;
the volume of retail turnover - since the constant share of profit in the price of the product, an increase in sales volume allows you to increase the amount of profit. When increasing the volume of trade turnover, it is necessary to remember its structure, since the profitability of certain product groups is different. Of course, one cannot give preference only to highly profitable goods; only rationalization of the structure of trade turnover will allow one to achieve a normal level of profit
pricing procedure - it is important to choose the right commercial strategy, because an increase in the share of profit in the trade markup can lead to a decrease in the volume of sales of goods due to high prices. But a logical consequence may be, in some cases, a reduction in the level of trade markups to speed up the sale of goods (for example, differentiated markdowns of goods, including seasonal, holiday or one-time discounts). This will increase the amount of profit due to the volume of trade turnover and by accelerating the turnover of working capital: the shorter the period for selling goods, the greater the amount of profit the enterprise receives per unit of time. It is also obvious that the greater the amount of working capital an enterprise has, the more profit it will receive as a result of their turnover alone. In this case, not only the total amount of working capital is important, but also the ratio between equity and borrowed funds, since the use of loans increases the costs of a trading enterprise;
level of distribution costs - with a constant value of the trade markup, by reducing the costs of the enterprise, you can increase the amount of profit received. The implementation of the economy mode allows you to reduce the current costs of the enterprise. It is necessary to take into account that the saving regime is understood not as an absolute, but as a relative reduction in distribution costs.
the structure of commercial products can have both a positive and negative impact on the amount of profit. If the share of more profitable types of products in the total volume of their sales increases, then the amount of profit will increase, and, conversely, with an increase in the proportion of low-profit or unprofitable products, the total amount of profit will decrease.
means of labor;
objects of labor;
labor resources.
For each of these two groups, the following types are distinguished:
- 1. extensive factors;
- 2. intensive factors.
Extensive factors include factors that reflect the volume of production resources (for example, changes in the number of employees, the cost of fixed assets), their use over time (changes in the length of the working day, equipment shift ratio, etc.), as well as unproductive use of resources (costs of materials for scrap , losses due to waste). Intensive factors include factors that reflect the efficiency of resource use or contribute to this (for example, improving the skills of workers, equipment productivity, the introduction of advanced technologies).
External and internal factors are closely related. But internal factors directly depend on the organization of work of the enterprise itself.
The cost of production and profit are inversely proportional: a decrease in cost leads to a corresponding increase in the amount of profit and vice versa.
Changes in the level of average selling prices and the amount of profit are in direct proportion: with an increase in the price level, the amount of profit increases and vice versa.
Profit analysis is carried out according to planned and actual data from the financial and economic planning departments, accounting departments, as well as annual and periodic reporting forms.
The analysis of profit, which is carried out according to its individual sources, is important. In the process of analyzing profit, special attention should be paid to the most significant article of its formation - profit (loss) from the sale of goods, products, works, services as the most important component of the enterprise’s profit, which often exceeds the balance sheet profit in volume. To carry out this analysis, the most convenient and widely used is factor analysis of sales profit. When conducting this study, the influence of the volume and structure of trade turnover, gross sales income, and distribution costs is determined.
It is recommended to conduct a multifactor analysis of changes in profit from product sales in the reporting period in comparison with the previous one under the influence of factors that have either a positive or negative impact on its change. The materials for profit analysis are the annual balance sheet, report in Form No. 2 “Profit and Loss Statement”.
Thus, profit management is a very complex and multi-step process. It is very important to conduct a competent and reliable profit analysis at each stage of this process. With the help of factor analysis, the manager is able to determine the degree of influence of the main factors on the amount of profit. That is, an analysis is given of the formation of profit at the enterprise according to its individual sources. When conducting this study, the choice of the most effective analysis method is of great importance. In modern scientific literature, there are many types of profit analysis, but factor analysis has the greatest practical significance. Its implementation provides the most objective assessment of profit generation at the enterprise.
After identifying all the factors influencing profit and assessing its indicators, it is necessary to begin planning the organization’s profit. This is a very important process that requires a high degree of training of specialists dealing with this problem. Planning is also divided into various types, including tactical planning. It is this that is most used in practice, as it is the link between strategic and operational planning. And, most importantly, decisions made during tactical planning are less subjective, because they are based on complete and objective information, and its implementation is associated with less risk.
As a rule, Russian entrepreneurs are reluctant to use long-term planning, since the country's economic situation is unstable. Therefore, most often they resort to tactical planning, which is carried out initially in accordance with the goals and conditions of the previous year, and only after this is necessary a calculation in terms of prices and conditions adopted in the long-term plan.
Changes in economic indicators over any time period occur under the influence of many different factors. The variety of factors influencing profit and, accordingly, profitability requires their classification, which at the same time is important for determining the main directions and searching for reserves for increasing business efficiency (Figure 2.1):
Figure 1.1 - Classification of factors influencing reserves for increasing profits and increasing profitability
Source:
There are internal and external factors.
External factors include natural conditions, government regulation of prices, tariffs, interest, tax benefits, penalties, inflation, etc. They do not depend on the activities of organizations, but can have a significant impact on profit and profitability.
Internal factors are divided into production and non-production. Production factors - characterize the availability and use of means and objects of labor, labor and financial resources and, in turn, can be divided into extensive and intensive. profit economic reserve
Extensive factors influence the process of generating profit and the level of profitability through quantitative changes: the volume of means and objects of labor, financial resources, operating time of equipment, number of personnel, working hours, etc.
Intensive factors influence the process of obtaining and increasing profits, increasing profitability also through qualitative changes: increasing equipment productivity and its quality, using advanced materials, improving processing technology, accelerating the turnover of working capital, etc. Non-production factors include, for example, supply and sales and environmental protection activities, social working and living conditions, etc.
The process of generating an organization's profit can, with a certain degree of convention, be divided into two stages: generating profit for the reporting period, generating net profit.
Consequently, factors influencing the financial result can be divided into two groups: those influencing the formation of profit for the reporting period and those influencing the formation of net profit. Let us consider each of these groups of factors in more detail.
The level of profitability and profit margin of the reporting period is influenced by a combination of many factors that depend and do not depend on the activities of the organization. The main factors of profit growth, as well as profitability, depending on the organization’s activities, are:
- - growth in production volume and sales of products;
- - reduction of production costs;
- - increase in prices for products sold;
- - changes in the structure of manufactured and sold products, improvement of the assortment.
The factors noted above affect mainly the profit from sales of products and, accordingly, the level of profitability. Due to the fact that the organization receives the overwhelming majority of the profit of the reporting period (90-95%) from the sale of commercial products, special attention should be paid to this part of the profit.
So, let's consider the first factor - the growth of production volumes and sales of products. An increase in the volume of production and sales of products in physical terms, other things being equal, leads to an increase in profits. With a high share of semi-fixed costs in the cost of production, an increase in production volume will lead to an even greater increase in profits due to economies of scale. Increasing volumes of production of products that are in demand can be achieved through capital investments, which requires directing profits to purchase more productive equipment, mastering new technologies, and expanding production.
Accelerating the turnover of working capital, which also leads to an increase in production volumes and product sales, does not require capital expenditures. However, inflation quickly depreciates working capital.
The next factor affecting profit and profitability is reducing production costs. Quantitatively, the cost price occupies a significant share in the price structure, so a reduction in costs affects the growth of profits, all other things being equal. If a change in sales volume affects the amount of profit in direct proportion, then the relationship between the amount of profit and the level of cost is inverse. The lower the cost of production, determined by the level of costs for its production and sale, the higher the profit, and vice versa. This factor that determines the amount of profit, in turn, is influenced by many reasons. Therefore, when analyzing changes in the cost level, the reasons for its decrease or increase must be identified in order to develop measures to reduce the level of costs for production and sales of products, and, consequently, increase profits due to this. Many organizations have divisions of economic services that are engaged in item-by-item cost analysis and seek sources and reserves for its reduction. But to a large extent, this work is depreciated by inflation and rising prices for raw materials and fuel and energy resources.
Don’t forget about the rise in prices for products sold. The factor that directly determines the level of profitability and the amount of profit from product sales is the prices applied. Free prices in the conditions of their liberalization are established by organizations and depending on the competitiveness of a given product, demand and supply of similar products by other manufacturers. Therefore, the level of free prices for products depends to a certain extent on the organization. A factor independent of the organization is the state regulated prices set for the products of monopolistic organizations, as well as for products that are socially significant. An increase in price in itself is not a negative factor. It is completely justified if it is associated with an increase in demand for products, their quality, improvement of technical and economic parameters and consumer properties of manufactured products. However, in countries with transition economies, including the Republic of Belarus, price increases are in most cases due to inflationary processes. Consequently, the profit increase factor is of an inflationary nature and cannot be considered as a reserve for the growth of financial results.
In addition to these factors, the amount of profit from sales is certainly influenced by changes in the structure of manufactured and sold products. The higher the share of the more profitable, the more profit the organization will receive. Accordingly, an increase in the share of low-profit products will lead to a reduction in profits.
All of the above factors directly affect the amount of profit of the reporting period, and also have an indirect impact on the size of the organization’s final financial result - net profit. The factors that directly form this indicator include mainly factors that do not depend on the organization’s activities, namely, the country’s legal and regulatory framework regarding taxation.
In addition to those mentioned, factors influencing the size of an organization’s profit are also specific areas for using the profit.
Net profit is used by the organization for the needs and purposes determined by the economic and social development plan. At the same time, special funds of the organization are formed from net profit: an accumulation fund, a consumption fund. A feature of the distribution of profits of a joint-stock company is the formation of a reserve fund intended to cover the losses of the organization. The procedure for the distribution and use of profits is fixed in the organization's charter and is determined by regulations that are developed by the relevant divisions of economic and financial services. The legislation only limits the size of the organization’s reserve fund (no less than 10% and no more than 25% of the authorized capital) and regulates the procedure for forming a reserve for doubtful debts.
A reserve for increasing the amount of profit when forming special funds of an organization is the possibility of using (reinvesting) a dividend fund: in order to develop the organization, if there is insufficient profit, a decision can be made to reinvest dividends on common shares and not pay income to their owners in the current year. The distribution of profit to the invested part and dividends is the most important point in financial planning, since the development of the joint stock company and its ability to pay dividends in the future depends on this.
In developed countries (USA, Canada, Germany, France, Italy, etc.), the calculation of the final results of an organization’s activities using the “input-output” method has become widespread. In accordance with this method, the overall result of the organization's work is determined by summing up the operational and financial results. For each type of activity, costs are compared with production and sales of products (sales), income, and the final result is determined.
Having studied the factors influencing profit and profitability, it becomes possible not only to determine them for each organization separately, but also to see the limits of their controllability, as well as to identify among them those that depend and those that do not depend on the business entity.
To assess the effectiveness of an organization, using the profitability indicator is not enough, since the presence of profitability does not mean that it is working well. The absolute amount of profitability does not allow one to judge the degree of profitability of a particular organization, transaction, or idea. Many organizations that have received the same amount of profitability have different sales volumes and costs.
