When analyzing a company's activities, an economist evaluates indicators such as profit and net income. Since the concept of profit is heterogeneous, the difference in these terms is quite impressive. Let's figure out what the specifics of each of them are.

Profit and net profit: the difference

According to general rules, profit is understood as the difference between the company’s income (from the sale of manufactured products) and the costs incurred in the production and sales process (for example, payment for the supply of raw materials, labor of the company’s personnel, involved intermediaries, etc.). In fact, economists always look at several types of profit: gross profit, sales profit, profit before taxes and, finally, net profit.

Gross profit is found as the difference between revenue from the sale of goods (reduced by the amount of VAT and excise tax) and their cost.

Profit from sales is an indicator of gross profit reduced by the amount of commercial and administrative costs.

Profit before tax is calculated by adjusting profit from sales by the amount of income or expense from operations not related to the main activity (non-operating).

And only now can we consider the formation of net profit. It corresponds to profit before taxes reduced by the amount of taxes paid and other necessary tax expenses, such as payments of permanent tax liabilities. Extraordinary expenses (if they were incurred) are also deducted from the net profit figure.

So, the net profit of an enterprise is only the share of the company’s profit remaining after making all the necessary payments. It is capital that can be used in the interests of the company’s owners - for example, invested in the development of production, used to replenish fixed and current assets, reward the company’s personnel, pay dividends, etc.

The types of profit presented above are interconnected economic categories, the calculation of which is faced by any company - from a start-up businessman to huge corporations. Having figured out what the difference between profit and net profit is, let's talk about net profit as an economic indicator.

Net profit: how is it determined and what does it depend on?

The amount of net profit, defined as the company's income from production and commercial activities, reduced by the sum of all expenses of the enterprise, is an indicator of the economic health of the company. It is influenced by internal and external factors. Internal ones include:

revenue amount;

• the value of the cost of goods sold;
• cost structure;
• product prices;
• level of tax burden on the company, etc.

To a lesser extent, the company’s profit is influenced by external factors, such as climatic and socio-economic conditions of the region, prices for resources, offers from transport workers, etc.

Net profit analysis

An economist, analyzing the amount of net profit, compares it with the profit of previous periods, calculating the absolute and relative values ​​of the differences.

An increase in net profit indicates an increase in production and sales, a reduction in costs, an improvement in the properties, characteristics and structure of products, possibly getting rid of idle equipment (selling it or leasing it), and wisely using production space and available resources.

A decrease in net profit indicates a decrease in sales volume, an increase in product costs, and a possible overpricing of the product, which is why sales figures have decreased. If everything is in order with production issues, then you should pay attention to a decrease in labor productivity and the quality of the product, violation of working conditions and other factors. A decrease in profits is an indicator that the company’s management focuses on and, accordingly, looks for ways to resolve emerging problems, developing measures to improve the situation.

Net profit in the income statement

The amount of net profit for the reporting period is reflected in line 2400 of the Statement of Financial Results (OFR), where all income and expenses of the company are shown, and the financial result is displayed. Unlike the general financial information in the balance sheet, line indicators are formed on an accrual basis. Therefore, cases of identical amounts of net profit in the balance sheet (in line 1370 as part of retained earnings) and in the general financial position are quite rare. The indicators can coincide only in a newly created company or subject to the full distribution of profits and the balance sheet being reset before the start of the reporting period.

Distribution of net profit

The amount of net profit remaining at the disposal of the company is distributed by the enterprise independently. The areas for using net profit can be very diverse. Funds are formed from its funds - savings, consumption, reserves.

The accumulation fund is used mainly for the development of the company in technical terms - new assets and technologies are acquired, research and development are financed, project development and other activities are carried out. The consumption fund pays dividends to shareholders, non-production bonuses to employees, material assistance and other social projects.

Reserve funds are formed to cover unforeseen expenses associated with natural disasters or those of a production nature. For example, they create a reserve for doubtful debts to stabilize the financial condition of the company in the event of overdue debts from debtors.

It shows operational efficiency and characterizes the solvency and liquidity of the company. The dynamics of the enterprise’s development depend on the size of the profit received, since part of it is invested in expansion, modernization, production automation, and personnel training.

The activities of any commercial organization are aimed at making a profit. The company must, at a minimum, cover losses, and at a maximum, receive income that will exceed them. Net income is called profit. Do not confuse profit and sales income (revenue).

In a narrow sense, profit is the difference between revenue from the sale of goods (work, services) and the costs incurred by the enterprise in the production of these goods (work, services). If we consider profit from the point of view of economic analysis, then its concept is much broader. The profit structure must be taken into account. As a result, the head of the company can determine which type of activity is the most profitable and which is unprofitable, and identify factors that affect the amount of profit. Based on this, he makes management decisions that allow him to increase profit.

Functions

To determine what impact profit has on the activities of an enterprise, it is necessary to study its main functions:

• Estimated - in a market economy, profit is an indicator showing the efficiency of an enterprise; this directly affects the market value of the company and its investment attractiveness.
• Stimulating - the greater the profit, the more resources the enterprise can use for its development.
• Fiscal - the profit of an enterprise affects not only its development, but also the development of the state as a whole. The larger it is, the higher the payments to the local and state budgets; accordingly, this money in the future is directed to infrastructure development and social needs.
• Control - the lack of profit indicates that the company is operating inefficiently and is incurring losses. Accordingly, it is urgent to take appropriate measures to overcome the situation.

The profit margin of an enterprise indicates how effectively management uses resources and is one of the main financial indicators.

Distribution

The development of an enterprise depends not only on the amount of profit received, but also on its distribution. The success of the company largely depends on how effectively it is used.

The distribution of profits must be structured in such a way that the result is an increase in production productivity. The distribution process itself involves directing a share of profit to expand, modernize production, to the budget, and pay dividends to shareholders. When distributing profits, it is important to consider the following principles:

• The profit received by the enterprise is divided between this enterprise and the state.
• The amount of part of the profit that should be redirected to the state depends on the amount of taxes and fees established by current legislation. This part cannot be changed arbitrarily by the enterprise.
• Regardless of the amount of profit received, the enterprise should be interested in expanding production and increasing financial results.
• First of all, the profit that remains at the disposal of the enterprise after paying taxes and fees should be directed to development, and the remaining part can be directed to consumption.

Since the amount of the part of the profit that is transferred to the state is established, the enterprise can distribute only the net part of the profit - which remains at its disposal after paying taxes and fees. The majority is reinvested into the company to ensure its development. The enterprise itself decides which part to allocate for accumulation and which for consumption. The management's task is to establish a distribution mechanism in such a way as to ensure dynamic and stable development.

Profit is the final financial result of the production and economic activity of an enterprise, an indicator of its effectiveness, a source of funds for investments, the formation of special funds, as well as payments to the budget. Making a profit is the goal of any commercial organization.

Entrepreneurial activity is the proactive independent activity of citizens of their associations, aimed at making a profit and meeting social needs. Consequently, making a profit is the immediate goal of the company and at the same time the result of all productive economic activities. A company can make a profit only if it produces products and services that are sold, that is, satisfy social needs. The subordination of these two goals - satisfying needs and making a profit - is as follows: you cannot make a profit without studying the needs and without starting to produce a product that will satisfy the needs. It is necessary to produce a product that will satisfy needs and, moreover, at a price that corresponds to solvent needs. And an acceptable price is possible only if the company maintains a certain level of costs, when all costs of consumed resources are less than the resulting revenue. In this sense, profit is the immediate goal of the functioning of the company and at the same time the result of its activities Gorfinkel V.Ya. Economics of the company: Textbook for universities. M.: Unity-Dana, 2003, pp. 234-258.

Firstly, profit is an indicator of the efficiency of an enterprise, because the very fact of profitability already indicates its effective operation.

Secondly, profit has a stimulating function; it is the main source of equity capital growth. In conditions of market relations, capital owners and managers, focusing on the amount of profit remaining at the disposal of the enterprise, make decisions regarding dividends and investment policies pursued by the enterprise, taking into account the prospects for its development. Profit in a market economy is the driving force and source of renewal of production assets and manufactured products.

Thirdly, profit is a source of social benefits for members of the workforce. At the expense of the profit remaining at the enterprise after paying taxes and paying dividends, as well as other priority deductions, material incentives are provided, social benefits are provided to employees, and social facilities are maintained.

Fourthly, profit is the source of revenue generation for budgets at various levels. It goes to budgets in the form of taxes, as well as economic sanctions, and is used for various purposes determined by the expenditure side of the budget.

Thus, the profit of an enterprise is the main factor in its economic and social development. Therefore, it is important to determine the mechanism for generating profit at the enterprise, its value in physical terms, to consider various types of profit and the scope of their application Kovaleva V.A. Finance and credit: Textbook. M.: Finance and Statistics, 2004, pp. 287-311.

A distinction is made between accounting profit and net economic profit. As a rule, economic profit refers to the difference between total revenue and external and internal costs.

The internal costs also include the normal profit of the entrepreneur. An entrepreneur's normal profit is the minimum payment required to retain entrepreneurial talent.

Profit, determined on the basis of accounting data, is the difference between income from various types of activities and external costs.

There are currently five stages of profit in accounting:

• - gross profit;
• - revenue from sales;
• - profit before tax
• - profit from ordinary activities;
• - net (retained) profit of the reporting period.

Gross profit is defined as the difference between revenue from the sale of goods (work, services) and the full production cost of goods sold.

Revenue from the sale of goods, products, works and services is called income from ordinary activities. Costs for the production of goods, products, works and services are considered expenses for ordinary activities. Gross profit is calculated using the formula:

where VR is sales revenue;

C is the cost of goods, products, works and services sold.

Profit (loss) from sales represents gross profit less administrative and selling expenses:

where Ru - management costs;

Rk - commercial expenses.

Profit from sales can be calculated in another way: by subtracting the full cost of goods sold from sales revenue.

Profit before tax is profit from sales taking into account other income and expenses:

Pdn = Ppr + Dpr - Rpr,

where Ppr is profit from sales;

DPR - other income;

Rpr - other expenses.

Profit from ordinary activities is determined by subtracting income tax and other similar payments from profit before tax:

where N is the amount of taxes.

Net profit (retained earnings) remaining at the disposal of the enterprise is determined taking into account the balance of extraordinary income and expenses.

where Chdr is extraordinary income and expenses.

Extraordinary income is considered to be income arising as a consequence of extraordinary circumstances of economic activity (natural disaster, fire, accident, nationalization, etc.). These include insurance compensation, the cost of material assets remaining from the write-off of assets unfit for restoration and further use, etc. Extraordinary expenses include expenses that arise as a consequence of emergency circumstances of economic activity (natural disaster, fire, accident, nationalization of property and so on.).

By receiving profit, the organization (enterprise) solves the problem of its use. Distribution of profit is an integral and inseparable part of the general system of distribution relations and, perhaps, along with the distribution of income of individuals, the most important.

Essentially, profit distribution should be considered in three directions, presented in Figure 1.

Not all the profit received remains in the company, since it is distributed between society represented by the state and the business entity. The object of distribution in any company is profit before tax. Its distribution means the direction of profit to the budget and by items of use within the framework of a business entity. Legislatively, a company's profit is regulated in the part that goes to budgets at various levels in the form of taxes and other obligatory payments. The principles of distribution are determined by the state. They are reflected in legislative acts and regulations on taxation. Profit received by a business entity is subject to taxation. A company that suffered a loss last year is exempt from paying tax on part of the profit of I.V. Kolchin. Finance of organizations (enterprises): Textbook. M.: Unity-Dana, 2007, pp. 387-399.

The difference between profit before tax and the amount of income tax characterizes net profit. Net profit is quantitatively equal to the profit at the disposal of a business entity. Expenses included in net profit include all excess expenses (excess expenses on advertising, entertainment expenses, travel expenses, excess loan expenses, depreciation expenses). The distribution of net profit in general is presented in Figure 2.

Net profit is used to finance the production development of the enterprise, satisfying consumer and social needs, financing the socio-cultural sphere, contributions to the wage fund in excess of wages and another part of the net profit can be directed to charitable needs, but not the entire amount of net profit is used by the enterprise for at your own discretion. Some types of fees and taxes are paid at the expense of net profit. Law of the Russian Federation dated December 27, 1991 No. 2116 - 1 (as amended on August 6, 2001) “On the income tax of enterprises and organizations”, for example, enterprise property tax for the right to trade, payment of fines for failure to comply with requirements for environmental protection from pollution, sanitary norms and rules, as well as penalties in case of concealment of profits from taxation or contributions to extra-budgetary funds and other payments Chueva L.I. Economics of the company: A textbook for university students. M.: Dashkov and Co., 2007, pp. 260-275.

Figure 2 - Distribution of net profit http://www.bankreferatov.ru

Retained earnings are added to the authorized capital of the enterprise. The distribution and use of profits have features determined by the organizational and legal form of enterprises (joint-stock companies, cooperatives, etc.).

When distributing profits and determining the main directions for its use, it is necessary to take into account the state of the competitive environment. Competition determines the need for a significant expansion and renewal of production potential.

In conditions of market relations, a business entity must strive, if not to obtain the maximum amount of profit, then to the amount of profit that will ensure the dynamic development of production in a competitive environment, allow it to maintain its position in the market for a given product, and ensure its survival. Solving these problems requires not only knowledge of the sources of profit, but also the determination of methods for their optimal use.

Making a profit is possible due to a monopoly position or the uniqueness of the product in the market for a particular product. The implementation of this source is possible due to the constant updating of the product and maintaining the share of production and sales. However, one should take into account the influence of such factors as growing competition from other business entities and the antimonopoly policy of the state.

Making a profit, which concerns almost all companies, is associated with production and entrepreneurial activities. The implementation of this source is possible under the appropriate conditions of today's market research. The amount of profit in this case depends on the right business, on the creation of competitive conditions for the sale of goods, on production volumes, on the size and structure of production costs I.V. Sergeev. Economics of an organization (enterprise): Textbook. M.: Finance and Statistics, 2006, pp. 129-149.

In the article we will consider net profit, the calculation formula, definition and its role in the financial analysis of an enterprise. Knowing the value of net profit allows enterprise managers to assess the efficiency of activities for the reporting period. Net profit has a great influence on the future development of the enterprise, on its competitiveness, investment attractiveness, solvency and financial reliability.

Net profit. Definition

Net profit(EnglishNetIncome,NetprofitNetearnings) – is the most important indicator of financial analysis and represents the final rate of profit, which remains after deducting all costs, including taxes.

Formula for calculating the net profit of an enterprise

To calculate net profit, it is necessary to make the difference between all costs and taxes of the enterprise. The formula has a single economic meaning, but can be reflected in different ways:

Net profit = Revenue – Cost of goods – Administrative and commercial expenses – other expenses – taxes;

Net profit= Financial profit + Gross profit + Operating profit – Amount of taxes;

Net profit= Profit before tax – Taxes;

Net Income= Total Revenue – Total Expenses.

Net profit is also called “the bottom line” because it is reflected in the balance sheet as the last line. In the balance sheet before 2011, net profit was reflected in line 190 of Form No. 2 (Profit and Loss Statement); after 2011, the net profit indicator is reflected in line 2400.

Formula for calculating net profit on balance sheet

Let us describe in more detail the formula for calculating net profit through the balance sheet lines.

Net profit (line 2400)= Revenue (line 2110) – Cost of sales (line 2120) – Selling expenses (line 2210) – Administrative expenses (line 2220) – Income from participation in other organizations (line 2310) – Interest receivable (line 2320) – Interest payable (line 2330) – Other income (line 2340) – Other expenses (line 2350) – Current income tax (line 2410)

The figure below shows part of the balance sheet of the enterprise OJSC “Surgutneftekhim” and its reporting for 5 years. As can be seen from the balance sheet in Excel, in order to obtain net profit, you must first calculate: gross profit (marginal profit), profit from sales and profit before tax.

Place of net profit in the enterprise income system

Net profit occupies a key position in the enterprise's income system. In order to understand, let’s consider its relationship with other types of income. The figure below shows the types of profit and their relationship. Each type of profit allows you to evaluate efficiency. So Marginal Profit shows the efficiency of sales and product sales. (you can find out more about this type of profit in the article: “ “) Operating profit reflects the efficiency of production or other type of core activity of the enterprise. Profit before tax is profit without taking into account other costs/income from non-core activities. As a result, net profit, cleared of all costs and expenses, shows the integral result of the functioning of the enterprise.

Goals and directions for using the net profit indicator

The amount of net profit characterizes the efficiency of the entire company/enterprise and is used for various purposes by various external and internal stakeholders (individuals, users).

Methods for analyzing the net profit of an enterprise

Let's consider various methods of analyzing the net profit of an enterprise. The purpose of this analysis is to determine factors, cause-and-effect relationships between indicators that affect the formation of net profit as the final indicator of the enterprise’s performance.

The following analysis methods can be distinguished, which are most often used in practice:

• Factor analysis;
• Statistical analysis.

These types of analysis are opposite in nature. Thus, factor analysis focuses on identifying significant factors that influence the formation of the enterprise’s net profit. Statistical analysis emphasizes the use of time series forecasting methods and is based on an analysis of the pattern of changes in net income over the years (or other reporting periods).

Factor analysis of an enterprise's net profit

The main factors in the formation of net profit are presented in the formula described earlier. To assess the influence of factors, it is necessary to evaluate their relative and absolute changes for 2013-2014. This will allow us to draw the following conclusions:

• How did the factors change during the year?;
• Which factor had the greatest change in net income?

In financial analysis, these approaches are called “Horizontal” and “Vertical analysis”, respectively. Below are shown the factors that form the amount of net profit and their relative and absolute changes during the year. The analysis was made for the enterprise OJSC “Surgutneftekhim”.

As we see, during 2013-2014, other expenses and other income changed as much as possible. The figure below shows the change in the factors that form the net profit for 2013-2014 for Surgutneftekhim OJSC.

Let's consider the second method of assessing and analyzing the net profit of an enterprise.

Statistical method for analyzing the net profit of an enterprise

To estimate the future amount of net profit, various forecasting methods can be used: linear, exponential, logarithmic regression, neural networks, etc. The figure below shows a forecast of net profit based on an analysis of changes in the indicator over 10 years. Forecasting was carried out using linear regression, which showed a downward trend in 2011. The accuracy of forecasting economic processes using linear models has an extremely low degree of reliability, so the use of linear regression can serve more as a guide to the direction of changes in profit.

Comparison of net profit with other indicators of enterprise performance

In addition to assessing and calculating the net profit of an enterprise, it is useful to conduct a comparative analysis with other integral indicators that characterize the efficiency and effectiveness of the enterprise. These indicators include: sales revenue (minus VAT) and net assets. Net assets show the financial stability of the enterprise and its solvency, revenue reflects its production and sales performance. The figure below shows a graph of a large Russian enterprise, OJSC ALROSA, and the relationship between its three most important indicators. As you can see, there is a close relationship between them, in addition, it can be noted that there is a positive growth trend in the enterprise’s net assets, this indicates that funds are being directed to expand production capacity, which in the future should increase the amount of net profit received.

Is the credit rating of a company related to the amount of net profit?

In my research, I analyzed the relationship between the amount of net profit for the Rosneft OJSC enterprise and the credit rating of the international agency Standard & Poor’s. There is a close relationship and correlation shown in the figure below - this proves the importance of such an indicator as net profit as a criterion of investment attractiveness not only in the national space, but also in the international arena.

Summary

Net profit is the most important indicator of the effectiveness and efficiency of an enterprise. Net profit reflects investment attractiveness for investors, solvency for creditors, sustainable development for suppliers and partners, efficiency/performance for shareholders and owners. To analyze net profit, two methods are used: factorial and statistical. Based on the factor analysis method, the absolute and relative influence of various indicators on the formation of net profit is assessed. The statistical method is based on forecasting time series of changes in net profit. The conducted study of the close connection between the credit rating of the international rating agency Standard & Poor’s proves the importance of the net profit indicator in assessing an enterprise in the international financial arena.

The JSC account contains only 3 million rubles, and the accounts of the JSC founders - famous businessmen T. and P. - contain more than 20 million rubles.
To which entity and on what basis can the bank apply with a request to repay the loan?

HELP URGENTLY!

Please note the fact that you had to leave your job, which brought in an income of 3 million rubles. In addition, to create the company, you invested your own funds in the amount of 200 million rubles. The interest rate is 10% per annum. Will you have an economic profit or loss and how much?

production. Material factors of production are owned by individual citizens, capitalists and landowners. Production in factories and farms is organized by entrepreneurs and farmers, that is, individuals or associations of individuals who either themselves are the owners of capital or have borrowed or leased from the owners. A characteristic feature of capitalism is free enterprise. The goal of any entrepreneur, be it an industrialist or a farmer, is to make a profit.

The real masters in a capitalist market economy system are consumers. By purchasing or refraining from purchasing, they decide who should own the capital and manage the enterprises. They determine what should be produced, as well as how much and of what quality. Their choice results in profits or losses for the entrepreneur. They make the poor rich and the rich poor. It is not easy to get along with such owners. They are full of whims and quirks, they are fickle and unpredictable. They don't value previous achievements at all. As soon as they are offered something that is better to their taste or cheaper, they abandon the old suppliers. The main thing for them is their own well-being and satisfaction. They don't care about the money costs of the capitalists, or the fate of the workers who lose their jobs; as consumers, they stop buying what they bought before.

When we say that the production of a certain product A does not pay off, what do we mean? This indicates that consumers no longer want to pay producers what they need to cover the necessary production costs, while at the same time the income of other producers turns out to be higher than production costs. Consumer demands play an important role in the distribution of production resources between various sectors of the production of consumer goods. Consumers thus decide how much raw material and labor will go into making A and how much the other product will require. It makes no sense, therefore, to oppose production for profit and production for consumption. The desire for profit forces the entrepreneur to supply consumers with those goods for which there is a demand in the first place. If the entrepreneur were not driven by the profit motive, he could produce more of goods A, despite consumers' preferences to have something else. The desire for profit is the factor that forces a businessman to most effectively ensure the production of the goods most preferred by consumers themselves.

Thus, the capitalist system of production is an economic democracy where every cent has a say. The people-sovereign is the consumer. Capitalists, entrepreneurs and farmers are the representatives of the people. If they are not up to the task assigned, if they are not able to produce at a minimum cost the goods demanded by consumers, they lose their positions. Their responsibility is to serve consumers. Profits and losses are the tools through which consumers control all types of economic activity.

Using the text, indicate any two characteristic features of a market economy discussed by the author!

In the annual report, the CEO stated: “The main objective of the company
“Increase the value of shareholders’ capital over time.” Next in
the report was as follows:
A) The company solemnly donated 1 million rubles. symphony orchestra
of your city.
B) The company transferred 300 million rubles for the construction of a new plant.
Overall, the project turned out to be effective, but during the first three years the plant did not
brought in profits, so revenues during this period were less than
could have happened if the construction of a new plant had been abandoned.
C) The company pays out half of its profits as dividends, and
the other half is reinvested. From now on she will pay only 20% in
as dividends.
What impact will each of these factors have on the cost?
company capital?

war of 1877-1878;

2) defeat of Russia in the Crimean War of 1853-1856;

3) accession of Alexander III;

4) construction of the Petersburg-Tsarskoe Selo railway.

2) Engineers after the armed uprising (1917-1921):

1) received low wages and lived mainly in one-room apartments;

2) did not receive any wages at all and lived mainly in communal apartments;

3) received high wages and lived mainly in separate multi-room apartments;

4) received wages 5-10 times higher than the worker’s salary, received a share of the enterprise’s profits and a free apartment.