Analysis of the use of profit and its indicators

The effectiveness of economic activity of any entity largely depends on how it analyzes the use of profit. This activity is carried out not on the basis of subjective estimates, but on the normative basis of tax legislation, available instructions and recommendations developed by agencies for a particular industry and type of enterprise.

The statistical basis for the analysis is accounting information on the movement of capital, the use of profits and the magnitude of losses, and others. The process, which involves the analysis of the use of profit, includes the study of determining factors that affect changes in taxable profit, the amount of dividends paid, as well as the amount of interest and tax deductions.

As a rule, tax institutes are interested in taxable profits, because of these indicators, first of all, the amount of tax and net income depend . The change in this parameter is usually influenced by factors that participate in the formation of profits.

As the analysis of use of the profit of the enterprise provides, the net profit acts as the important indicator of final results of its activity. Mathematically, it is calculated as a simple difference calculated between a certain amount of profit and an amount consisting of such items as taxes from profits, economic sanctions and other payments that are covered by profit. This value is determined by the factors of the dynamics of total profit, as well as by those factors that affect the specific value of net profit, determined in relation to the total profit. For example, in order to find out how the amount of net profit varies, the change in profit that occurs due to each individual factor is multiplied by the specific weight.

At all calculations it is necessary to consider, that the net profit can be used only in such a way as it provides the constituent document of the enterprise. Therefore, its use is regulated and can be sent only to:

- investment in economic development;

- creation of reserve development funds ;

- payment of dividends;

- formation of insurance funds.

It is very important that the analysis of the use of profit takes into account the proportionality of the distribution of capitalized and consumed quantities, because this allows the enterprise to determine and adequately establish:

- volume of investments for the development of a production enterprise;

- the rate of return to the owners of the enterprise.

In this analysis, it is appropriate to remember that the factors that determine the adequacy of the proportionality in question are: legal restrictions, tax preferences and benefits, rates of return and amounts of foreign investment. These factors are usually attributed to external factors. Internal include: level of profitability, availability of profitable investment projects; The amount of leverage, the presence or absence of domestic investment sources, the level of real solvency. It is important that the analysis takes into account the need for the company to accelerate the completion of projects that are already being implemented, since additional and unforeseen financing of these projects can significantly affect the use of profit.

For example, this indicator is the efficiency of using the fixed assets of the enterprise. To evaluate it in the analysis it is important to show how much and why the basic articles of profit use fluctuate. To optimize these parameters, it is necessary either to change the established norms of net profit or to change the value of the share of this article of its use.

In short, knowing the exact figures of net profit and its dynamics, the analyst has all the possibilities to accurately determine the degree of their influence on the quantities and parameters of changes in consumed and capitalized profits.