Among the methods for determining prices based on the norms of profitability to costs, it should be noted: the "cost plus" method and the method minimal cost. The "cost plus" method consists in calculating the price by adding to the cost of production and sale of a fixed additional value - profit. This pricing method is actively used by manufacturing firms in the formation of prices for goods and services in a wide range of industries. The level of additional amount (profit) varies depending on the type of industry.

When using the minimum cost method, the price is set at a minimum level sufficient to cover the costs of producing a particular product and provide a small amount of profit for the firm, that is, in this case, the price is slightly higher than marginal cost. Selling a product at a price calculated using this method is effective in the saturation stage, when there is no increase in sales and the firm aims to maintain sales at a certain level. Such a pricing policy is also rational when conducting a campaign to introduce a new product to the market, when one should expect a significant increase in sales of the specified product as a result of offering it to the market. low prices. Good results can be achieved when selling at low prices can lead to active expansion of sales and therefore to a sufficient profit.

But with the inept use of the methodology under consideration, the company is threatened with losses. Since prices are determined by the suppliers of goods, they do not always take into account market demands and the state of competition.

The model for determining prices based on profitability standards has the form

where P - price; Z - costs; - profitability ratio to costs, i.е. the rate used to determine the value of the unit profit in the price and set as a percentage of the cost of producing a unit of output.

In commercial practice, you can meet using the following types of profitability ratios:

single rate, determined by the ratio of profit to total amount production costs

; (4.2)

single rate, determined by the ratio of profit to variable costs

; (4.3)

a two-element standard designed to provide the firm with a sufficient return on investment; the first element of the standard in this case is determined as a percentage of the cost of materials used for production and is designed to ensure necessary profitability investments in the creation of stocks of these materials; the second element of the standard is determined in relation to the amount of costs for wages and overhead costs and should ensure an appropriate level of return on investment in physical (real) assets.

Ratio of profitability to costs
, determined by expression (4.2), is also called the standard of profitability of products.

Dividing the numerator and denominator of formula (4.2) by the volume of production Q, we obtain an expression for determining the standard of profitability of products

, (4.4)

where ATP- profit per unit of production, or specific profit; ATS- average, or unit costs associated with the creation and sale of a unit of goods or services.

From (4.4) it follows that the specific profit can be defined as follows:

. (4.5)

Taking into account (4.5), the expression for determining the price based on the standard of profitability of products (profitability to costs) has the form

The choice of the type of rate of return depends, as a rule, on the following factors:

complexity of accounting for various types of costs;

connection of costs of a certain type with the economic value of the goods for buyers; for example, in some cases this economic value depends significantly on the cost of materials and labor intensity, and hence on the wage intensity of products. This situation is typical for such types of goods as art and jewelry, as well as hand-tailored clothes and shoes;

the volume and conditions for attracting additional investments to ensure the release of this product; If the volume of such investments is significant for the company, and the conditions for attracting them require a return in a very short time, then pricing with such a level of profitability comes to the fore that it ensures the solution of such problems.

In any case, however, the basis for the formation of the level of profitability ratio is the company's need for profit as a source of funds for:

financing its development,

meeting the demands of capital owners.

The most objective starting point for determining the rate of return on costs is the level of return on capital required by the company.

(4.7)

where - the total value of the assets.

The value of return on equity depends on the turnover of assets and the profitability of sales.

Asset turnover
- this is the amount of sales revenue received during the reporting period (month, quarter, year) per unit value of all assets of the company

, (4.8)

The indicator of profitability (profitability) of sales characterizes another aspect of the company's activity - the share of its gross profit in the total amount of sales proceeds. It is calculated by dividing the total gross profit (sales income) by sales revenue:

, (4.9)

where
- sales profitability.

Multiplying the values ​​​​of asset turnover and profitability (profitability) of sales gives us the value of the actual return on capital (total assets) of the company

. (4.10)

In practice, the value of the normative (target) level of return on capital is usually set. Thus, since the value of the firm's assets is known and fixed, the total amount of profit that can ensure the achievement of such profitability is also known.

. (4.11)

And then the formula for calculating the profitability of sales takes the form

(4.12)

But return on sales is an indicator that cannot be directly used in pricing. To do this, you need an indicator of profitability to costs, which can be determined from the expression

(4.13)

Expression (4.13) is obtained by transforming the following equation:

. (4.14)

Taking into account (4.10), formula (4.14) takes the form

, (4.15)

where
- the level of profitability of capital, set by the owners of capital (in fractions of a unit);
- the turnover ratio of the company's assets.

Evgeny Malyar

# business vocabulary

What is it and how to calculate it

The process of calculating the internal rate of return can be automated, but it can also be done manually - the formula is quite simple.

Article navigation

• What is IRR
• Advantages of the method
• disadvantages
• Calculation formula
• IRR: calculation example
• What does this mean
• Rate of return
• Average rate of return
• Calculation of the rate of return on investment, taking into account depreciation
• findings

Today, when financial literacy has become an urgent need for every entrepreneur, there is a need to present the basic concepts in the simplest and most accessible language possible. This article will attempt to explain what is meant by the internal rate of return, what is needed and how this important indicator is calculated.

What is IRR

Foreign economists use the term IRR (Internal Rate of Return), translated from English as "internal rate of return", but in our country it is called the internal rate of return. Its definition sounds difficult, but nevertheless, first you should familiarize yourself with it, and only then try to understand its essence.

Definition: IRR is the percentage of the discount rate that equalizes the value of discounted benefits and costs.

The reader should immediately be reassured: far from all graduate economists understand this tricky formulation, but more often they pretend that there is nothing complicated in it for them.

First of all, you need to understand what the phrase "discount rate" means. In this context, its meaning has little to do with the popular word "discount".

The discount rate is a percentage that allows you to roughly estimate the amount of future earnings, bringing it in line with current economic realities.

In other words, this is the percentage by which the probable profit received in the future, but theoretically transferred to the present, will fall in price. It can be used to understand what could be bought right now with the money that the entrepreneurial structure wants to earn when planning an investment.

Now the above definition becomes a bit clearer. When evaluating the feasibility of investing in a project, the manager of capital wants to know at what interest rate his money will simply return (hence the English Return - “return”) without prejudice to inflationary losses. This situation is characterized by the equality of the values ​​of the discounted benefits and costs, and is described by the expression "keep your own interests".

The indicator is considered borderline, since no one is interested in such non-profit investments - everyone wants to earn, and as much as possible. It is understandable to want to calculate the IRR in order to evaluate the prospects of a given project and compare them with the opportunities provided by other investment options.

Brief conclusion: the internal rate of return determines the likely rate of increase in the price of invested capital. The same IRR indicator indicates the upper allowable limit of the bank rate in case of borrowing capital.

If the money is borrowed, for example, at 6% per annum, and the IRR is 7%, then the business is obviously unprofitable, and it is better not to start it.

Advantages of the method

Like any scientific algorithm, the method of applying the IRR indicator has both advantages and disadvantages. The advantages in this case are expressed by opportunities that are not available when using other methods for assessing investment prospects:

• Can be compared different variants investments and choose the most effective ones (with the highest IRR);
• Let us analyze several projects with different periods (horizons) of investment and determine the most profitable of them.

disadvantages

The application of the IRR method is limited by several conceptual principles, including:

• Difficulty in forecasting income. According to the calculations provided by the management of the investee company, payments should be received according to the schedule, which, as practice shows, is not always observed. Risks are present, they are inevitable and it is not possible to foresee all the obstacles. At the same time, pleasant surprises happen infrequently.
• The percentage nature of the IRR does not make it possible to operate with specific absolute amounts. One can only assume that with such and such a value of IRR, the investment will break even, and with a smaller value, losses are inevitable.
• The method does not take into account the factor of possible reinvestment of capital, that is, putting into circulation the funds earned during the operation of the project. The actual return on investment may differ significantly from the calculated value for the better.

Brief conclusion: the IRR method is not a self-sufficient way to assess the profitability of an investment and should be used in combination with other forecasting methods.

Calculation formula

IRR is usually calculated in two predicted values ​​- the largest and the smallest, which allows flexibility in using this tool.

Without going into mathematical subtleties, you can simply give a ready-made formula, according to which the minimum value of the internal rate of return is most often calculated:

Where:
IRRmin - the minimum number of internal rate of return;

As can be seen from the formula, the root is taken to the power corresponding to the number of years in the investment period.

To put it simply, we can formulate the essence of this formula in a more understandable form. The ratio of return of funds to the amount of investment is summed up over the years, and when they form the total amount of the investment, the IRR becomes equal to zero, but at that moment nothing needs to be predicted. Analysis is important at the initial and intermediate stages.

The maximum value of the same indicator is calculated using a very similar formula, with the same variables, but without the radical sign:

Where:
IRRmax - the minimum number of internal rate of return;
n is the investment period in years;
Kn - the estimated amount of money back by years;
IS is the amount of the initial investment, thousand rubles;

IRR: calculation example

The conditions of the task are presented in the form of a table:

We substitute the values ​​in the formulas:

What does this mean

The potential investor compares the results obtained with the cost (price) of the invested capital, expressed as a bank interest rate S. There are situations when:

S is greater than IRRmax. Things are bad, you can’t invest in this business. Even in the best case, the profit will not cover bank interest.

S is equal to IRRmin. The project is on the edge. He is adventurous and can bring losses, but the decision on the deposit is made by the investor, taking into account many additional factors known to him.

S is less than IRRmin. There is reason to believe that the proposal deserves the closest attention of potential investors.

It is also important to be able to compare the values ​​of internal rates of return of different projects. As it has already become clear, the higher it is, the better.

Rate of return

This indicator without the adjective “internal” contains the same meaning, but it reflects not the predicted or expected, but the actual level of profitability of the attracted assets.

The rate of return NR is calculated using a simple formula:

Where:
NR - rate of return;
P is the profit received by the investor;
I is the total investment amount.

The indicator has an estimated value and in this case serves for comparison end result(as a percentage of profit from the amount invested) with expectations. Can be expressed as a percentage (when multiplied by 100%) or as a ratio (decimal).

Average rate of return

Another important parameter that is of interest to a potential investor and affects the prospects for investing in a particular project is ARR (the abbreviation of the English term Average Rate of Return, literally - “average return rate”, also translated as “average return). The need for this indicator is due to the uneven (most often planned) receipt of dividends. In the initial period of the project, the amounts of payments are usually low, but as they develop, they increase. At the same time, the investor shows healthy curiosity about his average income as a percentage of the amount invested.

Where:
ARR - average rate of return;
∑P is the total income of the investor;
n - Number of months or years (depending on the forecast period);
I - The amount invested in the project by months or years.

Calculation of the rate of return on investment, taking into account depreciation

Another method, although somewhat more complicated, implies greater accuracy, since it takes into account the property of all assets to age over time. If the investment is long-term and its term is measured in years, then this factor should be taken into account by introducing an additional parameter into the formula that characterizes the depreciation of assets D:

Where:
D - return on investment, taking into account depreciation;
Cs - Initial value of assets;
Ce - Residual (liquidation) value for the period of the planned payback of the investment;
N - Lifetime of assets.

Internal rate of return (IRR)

Under internal rate of return, or internal rate of return(IRR) investments understand the value of the discount rate at which NPV project is zero:

IRR = i, at which NPV = f(i) = 0.

The meaning of calculating this coefficient when analyzing the effectiveness of planned investments is as follows. IRR shows the maximum allowable relative level of expenditure that can be associated with a given project. For example, if the project is financed entirely by a loan from a commercial bank, then the value IRR shows the upper limit of the acceptable level of the bank interest rate, the excess of which makes the project unprofitable.

In practice, any enterprise finances its activities from various sources. As a payment for the use of advances in the activities of the enterprise financial resources it pays interest, dividends, remuneration, i.e. incur some reasonable expenses to maintain its economic potential. An indicator characterizing the relative level of these incomes can be called at the price of (attracting) capital(capital cost, CC). This indicator reflects the minimum return on the capital invested in its activities, its profitability and is calculated by the formula arithmetic weighted average.

The economic meaning of this indicator is as follows: the enterprise can make any decisions of an investment nature, the level of profitability of which is not lower than the current value of the CC indicator (capital price for this project). It is with him that the indicator is compared irr, calculated for specific project, while the relationship between them is as follows:

• if IRR > CC, then the project should be accepted;
• if IRR then the project should be rejected;
• if IRR = SS, the project is neither profitable nor unprofitable.

Another interpretation is to interpret the internal rate of return as a possible discount rate at which the project is still profitable according to the criterion NPV. The decision is made on the basis of comparison IRR with standard profitability; wherein the higher the internal rate of return and more difference between its value and the chosen discount rate, the greater the safety margin of the project. This criterion is the main guideline in making an investment decision by an investor, which does not detract from the role of other criteria. For calculation IRR using discount tables, two values ​​of the discount coefficient are selected so that in the interval () the function changes its value from "+" to "-" or from "-" to "+". The following formula is applied:

(5.2)

where is the value of the discount factor, at which ; – the value of the discount factor, at which .

The accuracy of the calculations is inversely proportional to the length of the interval (), and the best approximation is achieved when and are the nearest to each other values ​​of the discount factor that satisfy the conditions formulated above.

Accurate value calculation IRR only possible with a computer.

Example

It is required to determine the value of the indicator IRR for a three-year project requiring an investment of 2000 den. units and having estimated cash receipts in the amount of 1000, 1500 and 2000 den. units

For calculation IRR using discount tables, we select two arbitrary discount factors, for example, and calculate the value of the function NPV= We get NPV =f(40%) = 207 and NPV = f(50%) = -75. So the function NPV =f(i) changes its value from "+" to "-", and this range of values ​​suits us for the calculation IRR(of course, it is not always possible to choose such an interval right away, sometimes it is necessary to carry out several iterations).

Further, in the same way, we can refine the obtained value IRR through several iterations, having determined the nearest integer values ​​of the discount factor, at which NPV changes sign. For our example, such integer values ​​are .

Thus, the desired value IRR is, according to our calculations, 47.17%. (Meaning irr, obtained using the financial calculator is 47.15%).

The main calculations are presented in table. 5.5.

Table 5.5. Calculations for example

The advantages of this criterion include objectivity, independence from the absolute size of investments, information content. In addition, it can be easily adapted to compare projects with different levels of risk: projects with a high level of risk should have a large internal rate of return. However, it also has disadvantages: the complexity of non-computer calculations, a large dependence on the accuracy of estimating future cash flows, as well as the impossibility of using in the case of the presence of several roots of the equation.

To determine the internal rate of return, as in the method of net present value, it is necessary to have assumptions that largely coincide with each other for both methods. The exception is the assumption regarding the investment of the released financial resources(reinvestment condition), as well as differences in capital costs and operating life. The corresponding assumption of the method of determining the internal rate (investment at the internal interest rate) is generally not appropriate. Therefore, the method of determining the internal rate of return without taking into account specific reserve investments or other modification of conditions should not be used to assess absolute profitability if complex investments are taking place and thereby a reinvestment process occurs. With this type of investment, there is also the problem of the existence of several roots when solving the original equation. In these cases, it may be difficult to interpret the results of the method for determining the internal rate of return.

The method of determining the internal rate of return for assessing relative profitability should not be applied, as noted above, by comparing the internal interest rates of individual objects. Instead, the investment must be analyzed to determine the difference. In the case of investments made in isolation, the internal interest rate can be compared with the calculated one to make comparisons possible. If investments for comparing profitability are complex, then the use of the method of determining profitability is inappropriate.

The advantage of the internal rate of return method over the net present value method is its interpretability. IRR characterizes the accrual of interest on the capital expended (return on capital expended).

In addition, the internal interest rate can be considered as a critical interest rate for determining the absolute profitability of an investment alternative if the net present value method is used when the "hard data" assumption is invalid.

Thus, the evaluation of investments using this method is based on determining the maximum discount rate at which projects will break even.

Criteria NPV, IRR and R/, most commonly used in investment analysis, are in fact different versions of the same concept, and therefore their results are related to each other. Thus, we can expect the following mathematical relationships to be fulfilled for one project:

There are techniques that correct the method IRR for use in a particular non-standard situation. One such method is the modified internal rate of return method. (MIRR).

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

Profitability of sales. Economic meaning of the indicator

It is advisable to start the study of any coefficient with its economic sense. What is this ratio for? It reflects the business activity of the enterprise and determines how the enterprise works effectively. The return on sales ratio shows how much Money from the sold products is the profit of the enterprise. What is important is not how many products the company sold, but how much net profit it earned net money from these sales.

The profitability ratio of sales describes the effectiveness of the sale of the main products of the enterprise, and also allows you to determine the share of the cost in sales.

Return on sales ratio. Calculation formula according to balance sheet and IFRS

The formula for return on sales by Russian system financial statements 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, the numerator can be used: gross profit, profit before taxes and interest (EBIT), profit before taxes (EBI). Accordingly, the following coefficients will appear:

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

To avoid confusion, I recommend using the formula, where the numerator is net income (NI, Net Income), because. EBIT is calculated incorrectly based on domestic reporting. It turns out the following formula for Russian reporting:

In foreign sources, the profitability ratio of sales - ROS is calculated by the following formula:

Video lesson: "Sales profitability: calculation formula, example and analysis"

Profitability of sales. An example of a balance sheet calculation for JSC Aeroflot

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

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

So, let's calculate the profitability of sales for four periods.

Return on sales 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 slightly increased to 6% in the first quarter of 2014, and in the second quarter it doubled to 3%. However, the profitability is greater than zero.

Let's calculate this coefficient according to IFRS. To do this, we take data on financial statements from the official website of the company.

Aeroflot IFRS report. Calculation of the profitability ratio of sales

For the nine months of 2014, the return on sales ratio of JSC Aeroflot 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 can be seen, over the year, the ratio deteriorated by 6% from 7% in 2013 to 1% in 2014.

Return on sales ratio. Standard

The value of the normative value for the given coefficient Крп>0. If the profitability of sales turned out to be less than zero, then you should seriously think about the effectiveness of enterprise management.

What level of sales profitability ratio is acceptable for Russia?

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

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

Analysis of the effectiveness of the organization's activities is impossible without taking into account profitability indicators. An indicator that characterizes the profitability of an activity or, in other words, economic efficiency This is the concept of profitability.

This parameter demonstrates how efficiently the company uses the available economic, labor, financial and natural resources.

For non-profit structures, profitability is the main indicator of work efficiency, and in commercial divisions, quantitative characteristics calculated with greater accuracy are important.

Therefore, there are many types of profitability: profitability of production, profitability of products, profitability of assets, etc.

But, in general terms, these indicators can be compared with efficiency indicators, the ratio between the costs incurred and the resulting profit (the ratio of costs to income). A business that brings profit according to the results of reporting periods is profitable.

Profitability indicators are necessary for the implementation financial analysis activities, identifying weaknesses, planning and implementation of measures to increase production efficiency.

The types of profitability are divided into those based on cost approach, the resource approach or the approach that characterizes the profitability of sales.

Different types of calculation of profitability pursue their own goals and use many different accounting indicators (net profit, production cost, commercial or administrative expenses, profit from sales, etc.).

Profitability of the main activity.

Refers to cost indicators, characterizes the effectiveness of not only the main activities of the company, but also work related to the sale of products. Allows you to evaluate the amount of profit received per 1 ruble spent.

This takes into account the costs associated with the direct production and sale of core products.

It is calculated as the ratio between the profit from sales and the sum of the cost of production, which includes:

• the cost of sold goods, works, products or services;
• cost of business expenses;
• cost of management expenses.

It characterizes the organization's ability to independently cover costs with profit. The calculation of the profitability of an enterprise is used to assess the effectiveness of its work and is calculated by the formula:

Genus = Prp / Z,
Where Z - costs, and Prp - profit received from the sale.

The calculation does not take into account the time elapsed between production and sale.

Return on current assets.

The profitability of current (in other words - mobile, current) assets shows the profit received by the organization from each ruble invested in current assets and reflects the efficiency of using these assets.

Defined as the ratio between net income (i.e. remaining after tax) and current assets. This indicator is intended to reflect the organization's ability to generate a sufficient amount of profit in relation to the current assets used.

The higher this value, the working capital are used more efficiently.

Calculated according to the formula:

Ptot = Chp / Oa, where

Рtot is the total profitability, net profit is Np, and Oa is the cost of current assets.

Internal rate of return.

The criterion used to calculate the effectiveness of an investment. This indicator allows you to evaluate the feasibility of investing in investment projects and shows a certain discount rate at which the net worth of funds expected in the future will be equal to zero.

This is understood as the minimum rate of return, when the investment project under study assumes that the desired minimum rate of return or the company's cost of capital will exceed a smaller indicator of internal profitability.

This calculation method is not very simple and is associated with careful calculations. In this case, inaccuracies made during the calculation can lead to the final incorrect results.

Moreover, when considering investment projects Other factors are taken into account, for example, gross margin. But it is on the basis of the calculation of the internal rate of return that the enterprise makes decisions of an investment nature.

Profitability of fixed assets.

The presence of profit, as an absolute indicator, does not always allow you to get a complete picture of the efficiency of the enterprise. For more accurate conclusions, relative indicators are analyzed, showing the effectiveness of specific resources.

The process of work of some enterprises depends on certain fixed assets, therefore, for a general increase in the efficiency of activities, it is necessary to calculate the profitability of fixed assets.

The calculation is carried out according to the formula:

Ros \u003d Chp / Os, where

Ros - profitability of fixed assets, Np - net profit, Os - cost of fixed assets.

This indicator allows you to get an idea of ​​what part of the net profit falls on the unit cost of fixed assets of the organization.

Calculation of profitability of sales.

An indicator that reflects net profit in total revenue demonstrates the financial performance of the activity. financial result can be used in calculations various indicators profit, this leads to the existence of several variations of the indicator. Most often these are: profitability of sales in terms of gross profit, net profit and operating profitability.

Formulas for calculating the profitability of sales.

According to gross profit: Rpvp = Bp / B, where Bp is gross profit, and B is revenue.

Gross profit is the difference between sales revenue and cost of sales.

For net profit: Rnp = Np / V, where Np is net profit, and B is revenue.
Operating margin: Op = EBIT/B, where EBIT is profit before taxes and deductions, and B is revenue.

The optimal value of the profitability of sales depends on the industry and other characteristics of the enterprise.

So in organizations that use a long production cycle, such profitability will be higher than those companies that work with a high turnover, although their efficiency may be the same.

Implementation efficiency can also show profitability products sold, although it takes into account other factors.

Threshold of profitability.

It also has other names: critical volume of production or sales, critical point, break-even point. Denotes this level business activity organization in which total costs and total revenues are equal to each other. Allows you to determine the margin of financial strength of the organization.

Calculated by the following formula:

Pr \u003d Zp / Kvm, where

Pr - profitability threshold, Zp - fixed costs, and Kvm - gross margin ratio.

In turn, the gross margin ratio is calculated by another formula:

Vm = V - Zpr, where Vm is the gross margin, V is revenue, and Zpr is variable costs,
Kvm \u003d Vm / V.

The company incurs losses when the sales volume is below the profitability threshold and makes a profit if this indicator is above the threshold. It is worth noting that with an increase in sales, fixed costs per unit of production decrease, while variables remain the same. The profitability threshold can also be calculated for certain types services or products.

Cost-effectiveness.

It characterizes the payback of the funds spent on production, shows the profit received from each ruble invested in production and sale. Used to evaluate the effectiveness of spending.

It is calculated as the ratio between the amount of profit and the amount of expenses that brought this profit. Such expenses are considered decapitalized, written off from the balance sheet asset, presented in the report.

The cost-benefit ratio is calculated as follows:

Rz = P/Dr, where P is profit and Dr is decapitalized expenses.

It should be noted that the calculation of cost-effectiveness indicators demonstrates only the degree of return on costs spent on specific areas, but does not reflect the return on invested resources. This task is performed by indicators of profitability of assets.

Factor analysis of profitability.

It is one of the parts of financial analysis and, in turn, is divided into several models, of which additive, multiplicative and multiple are most often used.

The essence of building such models is the creation of a mathematical relationship between all the studied factors.

Additive ones are used in cases where the indicator will be obtained as a difference or sum of the resulting factors, multiplicative - as their product, and multiple - when the factors are divided into each other to obtain the result.

Combinations of these models give combined or mixed models. For a complete factor analysis profitability, multifactorial models are created that use various profitability indicators.