Methodological aspects of the Industrial enterprise’s productive capital profitability analysis

Abstract

Assets’ profitability does not characterize the level of yield of different types of activities of the enterprise.
The profit earned from sales of products has the biggest relative share in the profit earned from the overall activity of the industrial enterprise. This arouses interest to the efficiency of enterprise’s different activities and mainly to its operating activity.
The profit from sales of products is an absolute indicator for operating activity’s efficiency, however, it does not provide the required information about the means used for its achievement. This requires using relative metrics for the enterprise’s operating activity efficiency analysis. The operating activity’s profitability is a key indicator that presents the profit rate of the capital used in this activity.

At operating level, the analysis of profitability of productive assets (productive capital), i.e. the assets used in the production process and sales of products – fixed tangible assets (productive main capital) and short term assets (productive working capital), place an important role.
As a logical consequence, the amount of productive capital should be comprised of those elements of the capital structure that are directly involved in the formation of profit from sales and in particular the profit from sales of products.
In order to specify the results from the productive capital profitability analysis in theoretic and applied aspect, we should identify the elements from the structure of the productive main and working capital that should be included in its amount. Logically, here come plenty of methodological questions whose correct theoretical clarification plays an important role for the financial management to develop and make correct and justified decisions for the development of business and for the achievement of financial and market stability and sustainable development of the enterprise.
This report studies the industrial enterprises’ operating activity and highlights the profitability of productive capital and the methodology for its analysis.
This report is aimed at identifying theoretically justified and feasible methodology for productive capital profitability analysis that is free of different possible interpretations of the analysis results for the impact of factors on the formation and dynamics of this important indicator characterizing the rate of return of industrial enterprise’s productive capital.