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Methodology of complex analysis of companies’ profitability

Author

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  • Daiva Tamulevičienė

    (Vilnius University, Lithuania)

Abstract

Profitability is one of the most important companies’ activity indicators. In the article, all profitability ratios are divided into three groups: sales, assets and equity. The importance of their analysis is underlined. In the financial analysis literature, the most common calculations of various financial indicators provided lack attention of their analysis. The complex analysis methodology recommended in the article comprises: 1) determination of analysis aims; 2) choice of analysis sources and technical methods; 3) calculation and evaluation profitability of sales (gross and net), profitability of assets (total assets, fixed and current assets), profitability of equity (authorized capital, shareholders’ equity and capital employed); 4) determination of factors influencing profitability; 5) usage of information collected during the analysis for internal and external users purposes. The recommended complex analysis methodology can be successfully applied to companies of various size and activity. After successfully applying it, it is possible to objectively evaluate efficiency of company's activity, potential risks, competitiveness and possibilities of continuity.

Suggested Citation

  • Daiva Tamulevičienė, 2016. "Methodology of complex analysis of companies’ profitability," Entrepreneurship and Sustainability Issues, VsI Entrepreneurship and Sustainability Center, vol. 4(1), pages 53-63, September.
    • Handle: RePEc:ssi:jouesi:v:4:y:2016:i:1:p:53-63
    DOI: 10.9770/jesi.2016.4.1(5)
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    References listed on IDEAS

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    1. Marina Matetskaya, 2015. "Education programmes for entrepreneurs in the creative industries in St. Petersburg," Entrepreneurship and Sustainability Issues, VsI Entrepreneurship and Sustainability Center, vol. 3(1), pages 66-73, September.
    2. Black, Geoff, 2004. "Applied Financial Accounting and Reporting," OUP Catalogue, Oxford University Press, number 9780199264711, Decembrie.
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    More about this item

    Keywords

    net profit; gross profit; complex analysis; profitability of sales; profitability of assets; profitability of equity; profitability ratios;
    All these keywords.

    JEL classification:

    • M49 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Other

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