Where:
P — net profit;
Цс is the value of the firm's capital investments;
Цо is the value of assets in circulation taking into account depreciation and wear.
Project profitability
To assess the probable income from bahamas phone data funds allocated to a new business, the metric of focus on the project's profitability is used. This indicator is important both for the creators of the future enterprise and for potential investors planning to finance its launch and development.
The calculation of the project's profitability orientation is performed based on the following formulas.
As a ratio of the total value of the business to the invested funds:
Rп = Сб / Ци ,
Where:
Sat - final cost of the business;
Qi is the volume of investment.
As a ratio of net income and depreciation expenses to the investment in the startup's share:
Rп = (П + А) / Ци ,
Where:
P — net profit;
A — depreciation amount;
Qi is the total cost.
Case: VT-metall
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Calculating the breakeven point
The optimal profitable threshold is a key criterion showing the level of profitability of a business at which it will become break-even. Simply put, it reflects the minimum sales volume or revenue amount required to cover all business expenses and break even.
The formula for calculating it is as follows:
Breakeven Point = (Fixed Costs × Revenue) / (Revenue – Variable Costs)
Let's briefly explain the basis of fixed and variable costs. Fixed costs are those costs that do not change depending on the volume of production. In other words, office rent, linear depreciation, accountant's salary will always be fixed regardless of the amount of products manufactured by the company.
Fluctuations in production volume are accompanied by changes in variable costs or expenses, such as wages of production workers, purchase of raw materials and supplies, payment for electricity for machines, etc.
Calculating the breakeven point
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The need to determine the breakeven point in a monetary context arises for a number of tasks:
analysis of the financial stability of the company as a whole;
search for opportunities to optimize and improve the organization of the enterprise’s production activities;
determining the payback period of projects (return on investment);
assessment of the effectiveness of the overall activities of the enterprise;
determining the cost of goods when sales volume increases or decreases.