Extensive model for analysis of industrial enterprises’ production capital profitability
Abstract
Production capital profitability is an important business indicator describing the efficiency of the industrial enterprises’ operating activity. This profitability indicator is a general relative indicator showing the amount of profit from sale of production earned with one hundred levs used production capital, i.e. that part of the enterprise’s production resources that is input in the fixed tangible assets and in some of its short-term assets.
Production capital profitability is analyzed as an output indicator that is formed and variable under the effect of a system of direct and indirect factors. The financial and business analysis, through the elements of its method, establishes and assesses the power and the direction of direct factors’ impact on the formation and changing of production capital profitability.
The production capital profitability is a topical issue due to the significance of the indicator and the possibility to manage the direct factors’ effect on its dynamics. Direct factors’ effect may be analyzed in different aspects, depending on the goals and tasks of the analysis, and according to the financial management’s needs of information for making decisions for the business management in operational and strategic aspect. For example, the direct factors’ effects are interesting: changes in the profit from sale of products and in the average amounts of fixed tangible assets and short-term assets; changes in the sales profitability, coefficient of absorption of fixed tangible assets and coefficient of short-term asset employability; changes in the coefficient of workload of fixed tangible assets and turnover rate of short-term assets, etc.
This study highlights the common methodology for analysis of industrial enterprise’s production capital profitability.
The subject matter of the study is the methodology for analysis of production capital profitability in relation to the sales profitability, the enterprise’s provision with fixed tangible assets, the efficiency of use of manpower, the total liquidity and the general structure of the enterprise’s capital.
The study is aimed at identifying an extensive model for analysis of production capital profitability combining different aspects of the industrial enterprise’s overall activity.
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