What is Profitability Control?

Profitability control refers to the ability of a company to measure the profitability of various products, regions, customer groups, distribution channels and order sizes to help managers decide which products or marketing activities should be expanded, contracted or cancelled. Profitability control is generally carried out by the company's internal marketing chief who is responsible for monitoring marketing expenditures and activities. It aims to determine the profitability of different products, different sales regions, different customer groups, different sales channels and orders of different sizes. It includes the analysis of the marketing cost control of each marketing channel, the net profit and loss of each marketing channel and the analysis of the gross revenue (sales revenue-variable expenses) contributed by the marketing activities, as well as the inspection of indicators reflecting the level of corporate profitability.

Profitability control

Right!

Profitability control refers to the ability of a company to measure the profitability of various products, regions, customer groups, distribution channels and order sizes to help managers decide which products or marketing activities should be expanded, contracted or cancelled. Profitability control is generally carried out by the company's internal marketing chief who is responsible for monitoring marketing expenditures and activities. It aims to determine the profitability of different products, different sales regions, different customer groups, different sales channels and orders of different sizes. It includes the analysis of the marketing cost control of each marketing channel, the net profit and loss of each marketing channel and the analysis of the gross revenue (sales revenue-variable expenses) contributed by the marketing activities, as well as the inspection of indicators reflecting the level of corporate profitability.

Chinese name

Profitability control

Foreign name

Profitability control

Meaning

Distributors measure various products

Positioning

Internet management

Control marketing plan includes three types of annual plan control, profitability control and strategic control.

The contribution of marketing channels to gross revenue is the result of offsetting revenue with variable expenses, while net profit or loss is the result of matching revenue to total expenses. Without strict control of marketing costs and production costs of enterprises, it is difficult for enterprises to achieve higher profitability and better economic benefits. Therefore, the company must make direct marketing expenses, promotion expenses, storage expenses,

Content of profitability control:

1. Analysis of marketing profit rate

The analysis of marketing profit margin is to allocate the obtained profits to products, regions, channels, customers and other aspects through a series of processing of financial statements and data, so as to measure the contribution and profitability of each factor to the company's ultimate profit how is it. The analysis steps are as follows:

(1) Determine functional expenses;

(2) Allocate functional expenses to various marketing entities. It measures the functional expenses incurred by the sales of each channel. Divide the cost of each function of each channel by the number of occurrences to obtain the functional cost of each channel;

(3) Prepare one for each marketing channel

Indicators of profitability investigation:

Making profits is one of the most important goals for all businesses. The following are some indicators of profitability investigation:

1. Sales margin. The profit margin of sales refers to the ratio between profit and sales. It represents the profit made by the enterprise for every 100 yuan of sales. It is one of the main indicators to evaluate the profitability of an enterprise. The formula is: sales profit margin = (profit for the current period ÷ sales) × 100%

2. Return on assets. The return on assets refers to the ratio of the total profits created by the enterprise to the total assets of the enterprise. The calculation formula is: return on assets = (profit for the period ÷ average total assets) × 100%. The reason why the denominator uses the average total assets is because the balance between the beginning of the year and the end of the year is very different. It is obviously unreasonable to use only the balance at the end of the year as the total.

3. Return on net assets. Return on equity is the ratio of profit after tax to income from net assets. Net assets refer to the net value of total assets minus total liabilities. The calculation formula is: return on net assets = (profit after tax ÷ average balance of net assets) × 100%

4. Asset management efficiency. It can be analyzed by the following ratios:

(1) Asset turnover. Asset turnover rate refers to the ratio of an enterprise's average total assets minus the net product sales revenue. The calculation formula is: asset turnover rate = net product sales revenue ÷ average asset occupancy

Asset turnover can measure the utilization efficiency of an enterprise's total investment. A high asset turnover indicates a high utilization efficiency of the investment.

(2) Inventory turnover rate. Inventory turnover rate refers to the ratio of the cost of product sales to the average balance of product inventory. The calculation formula is: inventory turnover rate = product sales cost ÷ average inventory of product inventory

Inventory turnover rate is the number of times that the inventory turnover is performed in a certain period, so as to evaluate the liquidity of the inventory. The average inventory balance is generally the average of the beginning and end of the year. Generally speaking, the higher the number of times of inventory turnover, the better, indicating that the level of inventory is low, the turnover is fast, and the efficiency of capital use is high.

Asset management efficiency is closely related to profitability. Asset management is highly efficient and profitability is correspondingly high. This can be shown from the relationship between the rate of return on assets, the turnover rate of assets and the profit margin on sales. The return on assets is actually the product of the turnover rate of assets and the profit margin on sales: Return on assets = (net product sales income ÷ average asset occupancy) × (profit before tax interest ÷ net product sales income) = asset turnover × Sales Margin