Small Business Profitability

“You have a long way to go in business, If you learn to estimate the numbers almost as fast and as insightful.as a good sign of character, she will recognize his interlocutors.” Henry Deterding

Reliability is an indicator of the economic efficiency of the enterprise, its profitabilityrentabel - profitable, profitable) or, in other words, the ratio of profits (gross income) and the costs invested in this income. The profitability of the enterprise can easily be judged of the welfare of the organization. In addition, cost-effectiveness is one of the criteria for quality management and investment attractiveness. Reliability is always considered in the business plan of the enterprise. It should be calculated on a regular basis, compared and monitored.

Cost-effectiveness

• to control profits;
• to monitor business development;
• In order to make their own profits comparable to that of competitors;
• to assess which sales from the enterprise are profitable or loss.

The calculation and analysis of the profitability of the enterprise shall be as follows:

PP=BP/(WOASr.+Osr)

BP is the balance income earned by the enterprise during the reporting period;

WOAsr is the average value of non-negotiable assets calculated during the reporting period;

Osr. is the average value of working assets calculated during the reporting period.

The profits can be compared to the capital of the enterprise, the sales or the cost of the product. Reliability is more complete and more visible than profits, helping to see the final performance of any enterprise. It identifies " narrow " seats, strengths and weaknesses of the organization and the dynamics of its development. Reliability shows the extent to which profits are used effectively.

Reliability can also be determined in the accounting balance when the counterpart is to be analysed. For this purpose, the balance sheet F.2 considers the sum of all costs (art.20+st30+st.40) and shares the balance sheet. The cost-effectiveness factor is thus obtained.