The ratio of the average value of the company's equity capital to the value of the net profit of the analyzed period.

Payback period of equity is calculated in the FinEcAnalysis program in the Analysis of the financial condition in dynamics block as the Payback period of equity.

Payback period of equity - what shows

Payback period of equity shows the number of years during which investments in this organization will fully pay off.

Payback period of equity - formula

The general formula for calculating the coefficient:

Calculation formula according to the balance sheet data:

where p. 190, p. 490 ng - at the beginning of the year, p. 490 kg - at the end of the year of the income statement (form No. 2).

Payback period of equity - value

Payback period of equity is important for the owners and shareholders of the company, because through an assessment of its size and dynamics, they, as a rule, draw conclusions about the effectiveness of their capital management. The faster investments in the company reach payback, the faster they begin to make a profit.

Was the page helpful?

Synonyms

More found about the payback period of equity

1. Analysis of financial statements. Practical analysis based on accounting (financial) statements Characterizes the growth rate of equity capital due to reinvestment of retained earnings Payback period of equity capital POSK POSK P4n P4k 2 NP 6.25 Reflects the number of periods multiple
2. Financial ratios Return on equity Payback period on equity Return on permanent capital Total return on sales Return on production Return on assets Return on profitability
3. The associated effect of operational and financial leverage in managing the financial condition of the organization By increasing the amount of its own funds, the organization gets the opportunity to invest them in new investment projects and make profit to the maximum extent possible while reducing turnover periods working capital and the payback period of equity, the organization quickly returns in the form of revenue the funds invested in current assets
4. Table of key financial indicators
5. Sales planning and analysis of economic activities at a trading company P6 9.46% 9.89% Payback period of equity years P9 2.526 2.445
6. Property complexes of industrial enterprises: methods of analysis and ways to improve The analysis begins with an assessment of the performance of the subject for the reporting and previous periods, further comparison financial indicators will allow to achieve the ultimate goal of the methodology - to identify factors ... The analysis begins with an assessment of the results of the entity's activities for the reporting and previous periods in the future, a comparison of these financial indicators will achieve the ultimate goal of the methodology - to identify factors that affect the size of deviations in the profit margins of the payback of the main and own capital In the study conducted by the authors, factors influencing the magnitude of deviations financial results are growth ... Particular indicators of the efficiency of the use of fixed assets found in the methods of different authors are capital productivity and payback Almost all authors believe that the capital productivity indicator calculated as the ratio of the amount produced and sold
7. Internal rate of return The indicator of the internal rate of return is most suitable for comparative evaluation not only within the framework of the investment projects under consideration, but also in a wider range, for example, in comparisons with the level of return on assets, the level of return on equity, the level of income from alternative investment if the internal rate of return exceeds the market rate of interest
8. Development of methodology for economic analysis of working capital A set of indicators economic activity the enterprise includes indicators of a direct or indirect time factor the period of repayment of receivables and payables the period of the operating and financial cycle the payback period of capital financial leverage With the aim of information support management personnel proposed to conduct economic analysis in ... Altman is a function of indicators characterizing economic potential enterprise and the results of its work for the past period general view credit index Z - the account has the form Z 1.2X1 1.4X2 3.3X3 ... K2 - net profit own capital KZ - proceeds from the sale of the asset K4 - net profit integral costs Probability
9. Analysis and evaluation of profitability and profitability Return on invested capital Return on investment characterizes the efficiency of the company's operating and investment activities shows how competently managers work with borrowed and equity capital. of capital is at the level of 70.7% production activities cost recovery has increased The profitability of total costs is the amount of net profit received by the organization for the analyzed period
10. Estimation of the cost of the investment project The decisive criterion for the assessment is the maximization of the rate of return on equity, the structure of assets and liabilities and the quality of the assets. possible ways... The time-based valuation is based on the use of indicators such as payback period net present value rate of return internal rate of return modified rate of return rate of return
11. The specifics of the formation of the investment portfolio of a construction company It should be understood as acceptable in a certain time period for a particular company, the structure and cost of the likely sources of its financing and that marginal price... In the context of a constant shortage of own sources of financing and a lack of working capital construction company needs to attract a large share of borrowed funds... In the context of a constant shortage of its own sources of financing and a shortage of working capital, a construction company needs to attract a large share of borrowed capital and government support in creating industrial and social infrastructure conventional lending, it allows you to attract investment resources, as a rule, for longer periods without providing guarantees for repayment of loan debt up to the payback of the project from the flow Money C F generated by the project itself
12. Risk premium cancels depreciation and multiplies prices In practice, investment myopia manifests itself in the preference of short-term assets over long-term ones, or more precisely, in a large and or growing demand for assets with a short payback period, accompanied by a drop in interest and or its low level in assets with a long payback period. investment myopia, agents demand for surrogate means of accumulation i. it was discussed above when the data of the Accounts Chamber of the Russian Federation on ... In the field of environmental management of developed countries, the procedure for discounting and determining the value of the capitalization coefficient of discount rates is debatable and is defined by modern Russian scientists as the tyranny of discounting 15
13. Methods for determining the discount rate when evaluating the effectiveness of investment projects DPP - payback period calculated on the basis of discounted cash flows borrowed money The ratio of own and borrowed capital in practice
14. Analysis of the organization's own capital and determination of its effectiveness SC at the beginning of the period According to T. A. Pozhidaeva If the income coefficient is greater than the utilization factor, then this means ... what is the time period of the funds
15. Debt capital management of a company in Russia 3 The dynamics of the ratio of debt and equity capital of the company is shown in Figure 1. An analysis of the ratio of debt and equity showed that even ... Priority directions are the attraction of financing in the capital markets by issuing public debt obligations and increasing the average maturity of financial obligations in order to bring the structure of the company's borrowed capital in line with the payback periods of investment projects.
16. Estimating the fundamental value of a business in the financial management system: methodological approaches and practical recommendations big investments capital, which leads to a very long payback period for invested investments due to excessive capital intensity oil and gas industry it is necessary to evaluate the entire invested capital of the company on ... In addition to choosing a calculation method according to income approach it is necessary to determine the cash flow model the duration of the forecast period the forecasting method the model for calculating the discount rate Since one of the features of the oil industry is...
17. Financial recovery of the enterprise IRR and discounted payback period production program and financial plan the aggregated form of the forecast balance is filled in by the years of the planned period. According to the aggregate forecast balance, the current liquidity ratios of the provision with own funds to restore the loss of solvency are calculated ... To implement the financial recovery plan, the debtor organization will need and can be provided with financial assistance in the form of loans and loans issuing and placing bonds state aid bills of value received free of charge increase in the authorized capital by increasing the nominal value of shares or additional issue of shares, etc. Procedure for issuing
18. Analysis of the value of the economic benefit of a corporation in the implementation of various approaches to calculating the depreciation premium in Russia Firstly, the managers of any industrial corporation tend to implement less risky investment projects with short terms payback period Owners, among which the state may be, on the contrary, are interested in long-term investments allowing the development of R&D ... In other words, these are investment projects with long payback periods and rather low profitability Secondly modern trend development of the domestic industry involves a fairly wide use ... The structure of investments of capital investments in fixed capital by sources of financing without small businesses in 2000-2013% Investments in the main ... included in the expenses of the tax period expenses on capital investments The amount of such expenses is determined as a percentage of the amount of the initial
19. Comprehensive analysis of the effectiveness of the use of intangible assets Reasonability factor for capital advances in the acquisition of intangible assets How many rubles of unfinished investments in intangible assets per ruble ... Вв - the cost of input into ... The result of the analysis of the interaction of these stages of analysis can be the formation of a reserve for involving intellectual property objects in the economic circulation as intangible assets Analysis of the supply and demand of intangible assets The 7th block in the figure ... In this case, traditional performance indicators long-term investments discount indicators and indicators that do not take into account the time factor payback period expected economic effect from the project, etc. The calculation of some indicators is presented in
20. Maximizing the value of oil and gas companies, taking into account the risks of the investment portfolio Fin2 Characterizes the share of the investment budget financed by business owners Fin3 Internal rate of return characterizes the discount rate at which NPV 0 Fin4 Discounted... Discounted payback period investment project years FS Fin 5 Resilience of the project to stressful price changes in... The probability of default determines the confidence level required to calculate the amount of unforeseen losses and the economic capital of an oil and gas company, which is calculated by the formula 6 γ 1 - PD 6 where γ

Profitability indicators are formed as follows:

where R&I - the profitability of certain economic assets and their sources P - profit (net or balance sheet)

Overall profitability

This indicator is the most common in determining the profitability of an enterprise and is calculated as the ratio of profit before tax to the proceeds from the sale of goods, works and services produced by the enterprise.

The indicator shows what part of the proceeds from sales is profit before tax, is analyzed in dynamics and compared with the industry average values ​​of this indicator.

where Pdn - profit before tax Vreal - sales proceeds

Profitability current assets

It is defined as the ratio of net profit (profit after tax) to the company's current assets. This indicator reflects the ability of the enterprise to ensure a sufficient amount of profit in relation to the working capital used by the company. The higher the value of this ratio, the more efficiently working capital is used.

where NP - net profit OA - the average annual cost of current assets

Profitability production assets

It is defined as the ratio of balance sheet profit to the average value of the sum of the cost of fixed production assets, intangible assets and working capital in commodity and material values.

The level of profitability of production assets is the higher, the higher the profitability of products (the higher the return on assets of fixed assets and the rate of turnover of working capital, the lower the costs per 1 ruble of production and unit costs for economic elements (labor tools, labor materials)).

where P - profit before tax PF - average annual cost of production assets

Return on assets of the enterprise

It is defined as the ratio of net profit to all assets of the enterprise

where PE - WB net profit - balance sheet currency

Profitability financial investments

It is defined as the ratio of the amount of income from financial investments to the amount of financial investments.

where Pfv is the profit of the enterprise from financial investments for the period EF is the amount of financial investments

Profitability of production

Profitability of production is defined as the ratio of gross profit to the cost of production.

where VP - gross profit CC - production cost

Payback period of equity

Payback period of equity. It is found by dividing the average annual value of equity capital by the net profit of the analyzed period. It has importance for owners and shareholders, because through an assessment of its size and dynamics, they, as a rule, draw conclusions about the effectiveness of their capital management.

The payback period of equity is calculated using the following formula:

where SC - average cost of equity NP - net profit

Payback period

The payback period of capital T is the ratio of capital Ksob to the sum of net profit and depreciation.

We determine by formula (65) the payback period of capital T, years:

T \u003d Ksob / (Pch + Ram), (65)

This parameter shows how many years the funds invested in this enterprise Ksob will pay off under unchanged conditions of production and financial activity.

T \u003d 1,339,218.00 / 1,326,687.16 \u003d 1.009 years \u003d 1 year 1 month

Business break-even point

The concept of a break-even business can be expressed as a simple question:

How many units of production must be sold to recover the costs incurred for this.

Accordingly, product prices are set in such a way as to recover all semi-variable costs and receive a mark-up sufficient to cover semi-fixed costs and make a profit.

As soon as the number of units of production Qkr is sold, sufficient to reimburse conditionally fixed and conditionally variable costs (full cost), each unit of production sold in excess of this will make a profit, and the increase in the amount of this profit depends on the ratio of conditionally fixed and conditionally -variable costs in the structure of the full cost.

Thus, as soon as the volume of units sold reaches the minimum value sufficient to cover the full cost, the enterprise begins to make a profit that grows faster than this volume. A similar effect is observed in the case of a reduction in the volume of economic activity, i.e., the rate of decrease in profits and increase in losses outpaces the rate of decrease in sales. The definition of the break-even point of housekeeping is shown in the figure:

The break-even point is calculated separately for each type (A, B, C) of manufactured products.

To determine the break-even point, the costs associated with the production and sale of each type of product must be divided into conditionally fixed and conditionally variable.

Based on the data on production costs calculated earlier according to the methodology, it is assumed that the conditional variables Ruper, rub., are the costs: Rm.p.b.ni, Rzori, Rzdi, Rsni.

The conditionally fixed Rupos, rubles, expenses for the entire volume should include: Rami, Ram.ni, Rari, Reki, Rts.nki, as well as a part of the overhead costs Rnki of the full cost of the Spi product, related to general factory and commercial expenses, which can be calculated from the expression Рнкi = (Спi - Сцi). Fixed costs Rupos are calculated on the volume of output of each type of product.

We determine by formula (66) conditionally variable Ruper costs:

Ruper \u003d Rm.p.b.ni + Rzori + Rzdi + Rsni, (66)

Ruper A \u003d 280.51 + 168.96 + 20.28 + 49.20 \u003d 518.95 rubles,

Ruper B \u003d 228.81 + 41.64 + 5.00 + 12.12 \u003d 287.57 rubles,

Ruper C \u003d 104.24 + 28.16 + 3.38 + 8.20 \u003d 143.98 rubles.

We determine by formula (67) the overhead costs Rnki:

Rnki \u003d Spi - Sci, (67)

Rnk.A = 950.96 - 565.20 = 385.76 rubles,

RNA.B = 393.25 - 305.08 = 88.17 rubles,

Rnk.S = 257.55 - 150.87 = 106.68 rubles.

We determine by the formula (68) conditionally constant Rupos costs:

Rupos \u003d Rami + Ram.ni + Reki + Rts.nki + Rnki, (68)

Rupos A \u003d 42.12 + 3.11 + 1.00 + 0.02 + 385.76 \u003d 432.01 rubles,

Rupos B \u003d 16.50 + 0.75 + 0.24 + 0.01 + 88.17 \u003d 105.67 rubles,

Rupos C \u003d 6.18 + 0.53 + 0.17 + 0.01 + 106.68 \u003d 113.57 rubles.

In this case, the break-even point for the product according to the formula (69):

Qkr A \u003d 432.01 * 2400 / (2150 - 518.95) \u003d 636 pieces / year,

Qcr B \u003d 105.67 * 3500 / (490-287.57) \u003d 1827 pieces / year,

Qcr C \u003d 113.57 * 4500 / (590 - 143.98) \u003d 1146 pieces / year

We enter all data on the economic analysis of the enterprise's activities in table 9.

Table 9 - Results economic analysis enterprise activities

Profitability of core business

Profitability of sales

Return on equity

Return on advanced capital.

Repayment ratio of receivables

The duration of the financial cycle

Operating cycle duration

3.2.4. Profitability analysis

The main indicators of this group are indicators of return on advanced capital and return on equity. The economic content of these indicators is to calculate how many rubles of profit fall on 1 ruble. advanced (own) capital.

You can use either total profit reporting period, or net.

Indicators do not have standards.

3.2.5. Indicators of the situation in the securities market

This analysis is performed in companies listed on stock exchanges and listing their shares there. securities. To financial reporting needed Additional Information for analysis.

The given indicators are conditional, since the terminology for securities in the Russian Federation has not yet been fully developed.

Earnings per share. This is the ratio of net income (NP), reduced by the amount of dividends on preferred shares, to the total number of ordinary shares. It is this indicator that largely affects the market price of shares. The disadvantage in the analytical plan is the spatial incompatibility due to the unequal market value shares of various companies. Calculation:

data accounting.

Share value. It is calculated as the quotient of dividing the market price of a share by earnings per share. The indicator shows how much investors are willing to pay at the moment for 1 ruble. earnings per share. The relatively high growth of this indicator in dynamics indicates that investors expect faster growth in the profits of this firm compared to others. Calculation:

Share dividend yield. The ratio of a dividend per share to its market price. This indicator characterizes the percentage of capital invested in the company's shares. This is a direct effect.

There is also an indirect effect (profit or loss) expressed in measuring the market price of the shares of a given firm. Calculation:

accounting and securities market data.

Dividend yield. Calculated by dividing dividend per share by earnings per share.

The interpretation of the indicator is the share of net profit (NP) paid to shareholders in the form of dividends. This indicator is associated with the profit reinvestment coefficient, which characterizes its share aimed at the development of production. The sum of the values ​​​​of this indicator and the profit reinvestment coefficient is 1. Calculation:

accounting data.

Share Quote Ratio. The ratio of a stock's market price to its book price. The accounting price characterizes the share of equity per share. The discount price consists of the nominal value of the share, the share of share premium (the accumulated difference between the market price of the shares at the time of sale and their nominal value) and the share of profit accumulated and invested in the development of the company. A coefficient value greater than 1 means that potential shareholders, when purchasing a share, are ready to give a price for it that exceeds the accounting estimate real capital per share at the moment. Calculation.

most often measured in years. Also, the indicator can be displayed in days, weeks, months, quarters, etc.

Explanation of the essence of the indicator

The payback period of equity is the most important coefficient for owners. The value of the indicator reflects the period during which their capital will pay off. This means that the use of equity capital will generate net income, which is equal to its current amount. The indicator is calculated as the ratio of the average annual amount of equity capital to the amount of net profit for the year.

Standard value:

The normative value depends entirely on the considerations of the owners about the efficiency of the use of their capital. If the company is commercial organization and the owners created it to generate profit, then you can determine the quality of the use of equity capital by comparing the current payback with the payback for alternative areas of investment. The easiest way is to compare the return on equity in the studied business entity and the return on investment in various financial instruments(deposit, diversified stock portfolio, etc.). If the return on equity is significantly lower than the values ​​for alternative directions, then it is unsatisfactory.

Of course, a negative value of the indicator is unacceptable and indicates a decrease in the welfare of the owners.

When analyzing, it is necessary to consider the indicator in dynamics, because a stable decrease in payback will indicate constant increase the efficiency of the company.

Directions for solving the problem of finding an indicator outside the normative limits

As in the case with other indicators of profitability, payback is formed under the influence of absolutely all areas of the company. Based on the calculation formula, you can reduce the payback by increasing the efficiency of using financial resources, which will allow to return part of the equity capital to the owners, or by ensuring the growth of net profit. To increase the latter, it is necessary to take measures to maximize income or reduce costs.

Calculation formula:

Payback period of equity = Average annual cost Equity / Net income (loss) (1)

Payback period of equity = 100 / Return on equity (2)

Average annual cost of equity = Amount of equity at the beginning of the year/2 + Amount of equity at the end of the year/2 (3)

Calculation example:

JSC "Web-Innovation-plus"

Unit of measurement: thousand rubles

Payback period of equity (2016) \u003d (1503 / 2 + 1494 / 2) / 491 \u003d 3.05 g.

Payback period of equity (2015) \u003d (1494 / 2 + 1403 / 2) / 473 \u003d 3.06 g.

Thus, the efficiency of JSC "Web-Innovation-plus" is high, and the return on equity is about 3.05 years. This is significantly higher than the payback of alternative instruments. The return on investment in securities is now low. Therefore, we believe that equity management is at the proper level.