The threshold of profitability and the system of indicators of operational analysis.

There are many methods that help inacceptance of both short-term and strategic decisions on enterprise management. Perhaps one of the simplest among them is operational analysis, which is also sometimes called breakeven analysis. In the course of this process, there are definitions of such indicators as the amount of coverage, the threshold of profitability and some others.

The basis of this type of analysis is the unitcosts of the enterprise for the production of products for variable and permanent. The reason for this separation is that different costs behave differently when sales and production volumes change. Thus, the value of the variable costs calculated per unit of output is always constant, but their total amount varies in proportion to the volume of production. But the amount of fixed costs, on the contrary, is always constant, however their share in unit cost is inversely proportional to the number of products produced.

One of the most important indicators iscritical program. It is a volume of production in kind, which allows an enterprise to function without loss. The threshold of profitability (breakeven point) is determined by multiplying the critical program by the price of the product. In other words, the profitability threshold is an indicator that characterizes the company's revenue level, in which break-even is achieved. Both these indicators can be determined both by studying the graph and analytically. Let us dwell in more detail on the second method.

To determine a critical program, afind the number of products that need to be produced and sold to cover the entire amount of fixed costs. Thus, it is enough to divide the sum of these most constant expenses by the difference between the price and the variable costs per unit. We should make a reservation that we proceed from the assumption that the enterprise sells exactly the same number of products as it produces. The threshold value of revenue, as already noted, can be found by multiplying the result in physical terms by the price.

Another indicator that requiresclose attention is the commercial margin. You can also meet such names as the amount of coverage or the contribution to the coverage. This indicator is determined very simply, by reducing revenue by the amount of variable costs. Accordingly, the amount of coverage must cover fixed costs and generate profits. Note that the commercial margin is proportional to the volume of output, but per unit its value does not change. In this regard, often determine the proportion of the amount of coverage in the proceeds. Knowing this value, we can apply one more method of calculating the threshold revenue - we divide the fixed costs by the fraction of the coverage amount.

To determine the extent to which an enterprisefar from unprofitableness, calculate the amount of the financial strength margin. It is determined by the difference between revenue received from the sale of products and the threshold of profitability. This indicator can also be calculated as a share of revenue.

The last indicator that I would likeconsider, this is operational leverage. He describes the degree of production risk, showing how many times the profit of an enterprise changes in comparison with the change in revenue. Calculating it is extremely simple and consists in relation to the commercial margin to profit. The risk, which is estimated by this indicator, is due to the fact that there is a constant part in the cost of production. This risk is all the more, the closer the enterprise works to the breakeven point. With the increase in revenue, the firm's activity becomes more and more safe from this point of view, since the share of fixed costs is steadily declining.

The calculations described above are carried out takingassumptions that all dependencies are linear. Of course, real interactions are much more difficult, and, for example, the actual threshold of profitability may differ from the one found, but for the basic analysis the described methods can be applied quite calmly.

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