Ways to increase profitability and profitability

Profit is an economic indicator that is constantly changing under the influence of various factors. The main ones are the growth in the volume of sales of products and the reduction of its cost. Therefore, the ways to increase profit and profitability are directly determined by the factors that affect the level of sales and costs (Fig. 8.4.).

They can be classified into internal and external. Internal include:

innovative activity of the enterprise, which consists in the development of a new product or a product of higher quality, possessing market novelty; introduction of the latest equipment and advanced technological processes, new types of raw materials and materials, improvement of product design; increasing the competitiveness of goods; development of new markets; diversification of production; reduction of material intensity, energy intensity and labor intensity of goods; improving the efficiency of the use of fixed and working capital; far-sighted borrowing policy.

External factors affecting profits include the following:

the nature of production activities; market conditions; inflation; the level of prices for material and technical resources; credit and tax policy of the state.

The profit of the enterprise is influenced by factors due to the specific characteristics of the industry to which it belongs. Whether an enterprise operates in a material, capital or labor-intensive industry depends on the level and structure of production costs, ways to reduce them and the rate of profit.

Security questions for topic No8

How is the total income of the enterprise determined? What is the income from non-operating operations? What functions does profit perform? How is the balance sheet profit of the enterprise determined? Give a description of the types of profit. What types of taxes does the company pay from profits? How is taxable profit formed? What is the difference between the profit remaining at the disposal of the enterprise and the net profit? What factors influence the proportions of profit distribution? What are the external factors that form the proportions of the distribution of profits? What tasks are solved in the process of profit distribution? What profitability indicators are planned at the enterprise? What is the profitability of the enterprise? How is the return on equity determined and characterized? What ways to increase profits exist at the enterprise?