Profitability Analysis Of Financial Indicators

1. sales profit margin index.

The main analysis index in profitability analysis is sales profit margin index.

The financial cost, as the cost of financing, must be deducted when calculating the total profit.

With the same factors as sales revenue and selling cost, the financial cost level will be different due to the different capital structure, and the profit margin of sales will be different.

At the same time, the net profit of investment is the profit gained from mutual participation, holding or other forms of investment among enterprises, and there is no matching relationship between the net profit and the sales revenue of current products in the sales profit rate.

Similarly, there is no matching relationship between sales profit margin indicators and net operating expenses and sales revenue of current products.

Therefore, the sales profit rate index does not conform to the matching principle and comparability principle.

It is also necessary to note that with the diversification of business modes, it will be difficult to distinguish between main business and other businesses.

In actual operation, there are

2. index of capital maintenance and appreciation.

The rate of capital maintenance and increment is an index to assess the ability of operators to maintain and increase the value of capital invested by investors.

Capital maintenance and appreciation rate has the following shortcomings:

First, the index is not only influenced by the results of enterprise operation, but also influenced by the profit distribution policy of enterprises, while the impact of price changes is not considered.

The two is that the numerator denominator is the data of two different points. There is no time correlation. If we consider the time value of money, we should plate the net assets at the beginning of the year into the value at the end of the year (or the value of the net asset discount at the end of the year) at the end of the year, and then compare it with the net assets at the end of the year (or the beginning of the year).

The three is the increase in paid capital and capital reserves caused by the objective causes of investors' investment capital, enterprise acceptance of donations, capital (equity) premium and asset appreciation. During the period of operation, the current value of profits allocated to investors is not included in the "undistributed profit" project at the end of the balance sheet.

Therefore, when calculating the rate of capital maintenance and increment, we should deduct the increase and decrease in the reporting period due to objective reasons, plus the profit allocated to investors.

Capital appreciation is the difference between the net assets at the beginning and end of the operation that the operators use the stock assets to carry out various business activities.

3. net assets yield index.

The rate of return on net assets reflects the rate of return on capital invested by shareholders of a company, reflecting the value added of the company's net assets.

There are two main problems in the net assets yield index.

First, because the amount of cash dividends paid to shareholders has been eliminated in the year-end net assets project, the calculation range of the net asset return rate of different dividend policies is different.

The two is that the net assets at the end of the year include the increase of net assets in the company year, and this part of the net assets is gradually acquired in the reporting year. After the company's use of the new net assets is naturally obtained, the above formula obviously does not take into account the use time of this part of the net assets, resulting in the calculation result of the net assets yield rate is not reasonable.

Many scholars and practitioners have made some useful attempts and discussions to amend and improve financial analysis indicators.