What Is the Relationship Between Revenue and Profit?

Revenue profit margin refers to the ratio of the total profit realized by the enterprise to the sales revenue of the same period. The income profit rate indicator can not only assess the completion of the enterprise profit plan, but also compare the management level of different enterprises and different periods to improve economic efficiency.

Income margin

Right!

Income profit margin refers to the total profit realized by the enterprise on the sales revenue of the same period

The main forms of corporate profitability are sales profitability, cost profitability, output value profitability, capital profitability and net profitability.

Calculation formula

Income Margin =

Profit margin

Profit margin is

In capitalist society, the ratio of the amount of surplus value to the amount of total capital advanced. It is a conversion form of the rate of surplus value, indicating the degree of capital appreciation, that is, the degree to which the capitalist makes a profit.

The purpose of the capitalist to produce commodities is to make money. He invests in turnover with a certain amount of value and obtains a greater value. This increase is brought by variable capital, the surplus value created by the unpaid labor of the hired workers. However, for capitalists, the various components of prepaid capital are equally important for the production of surplus value. Regardless of where the surplus value comes from, it is always a balance that exceeds the cost price, and thus a balance that exceeds the total capital paid . This balance is maintained at a ratio to the total capital paid in advance, which is the rate of profit. If p is used as the profit rate, m is the surplus value, c is the constant capital, and v is the variable capital, its calculation formula is

formula

Marx said: "The ratio of surplus value calculated using variable capital is called the rate of surplus value; the ratio of surplus value calculated using total capital is called the rate of profit. These are two different methods of calculating the same quantity. Because of different calculation standards, they represent different ratios or relationships of the same quantity "(Complete Works of Marx and Engels, Vol. 25, p. 51). For every capitalist, what he often cares about is this profit rate. The prediction of the fluctuation of the profit rate has become the most important basis for his production and operation decisions. The rate of surplus value indicates the degree of increase in variable capital, or the degree of exploitation of wage workers by industrial capitalists. It reflects the rate at which new value created by workers is distributed between capitalists and workers, and thus reflects capitalist exploitation. The profit rate indicates the ratio of the amount of surplus value to the total capital paid in advance, that is, the degree of capital proliferation, or the degree of capitalist profit. Since there is no inherent necessary relationship between total capital value and surplus value, the profit rate masks the employment of capital The exploitative nature of labor has mystified capital relations.

Since the profit rate is a conversion form of the rate of surplus value, the factors that affect the change in the rate of profit depend first and foremost on the rate of surplus value. Assuming other conditions remain the same, the level of profit is directly proportional to the level of surplus value, and inversely proportional to the value of total capital advanced. The level of profitability also depends on the following three factors:

Organic capital composition: Under the condition of the surplus value rate, the level of profit rate is inversely proportional to the level of the organic capital composition, that is, the lower the organic capital composition, the more live labor absorbed by a certain amount of capital, and the more the surplus value extracted More, the higher the profit rate; otherwise, the opposite;

Speed of capital turnover: Profit margin is generally calculated on a one-year basis. Assuming other conditions (organic composition of capital, rate of surplus value, length of working days) are the same, the level of annual profit rate is directly proportional to the speed of capital turnover and inversely proportional to the length of capital turnover time. The faster the capital turnover, the same amount of variable capital can promote more living labor within one year, so as to squeeze more surplus value and increase the profit rate; and vice versa;

Savings in the use of constant capital: If labor conditions are saved at the expense of the health of hired workers, the cost of constant capital can be reduced, thereby increasing profit margins. Through technological progress and labor productivity, the production of The reduction and comprehensive utilization of excreta (waste, waste water, waste gas, etc.) can not only reduce the expenditure of constant capital, but also increase income, thereby increasing profit margins; changes in social labor productivity will also pass through the constituent elements of constant capital, In particular, changes in the price of raw materials (this situation has nothing to do with changes in supply and demand), which promotes capital growth or depreciation (this situation has nothing to do with changes in the value of money), which has a direct impact on profitability. If other conditions remain unchanged, the level of profit margin is inversely proportional to the level of raw material prices.

As a result of the flow of capital in different sectors in order to chase the profit rate, the profit rate tends to be averaged and an average profit rate is formed. With the advancement of science and technology and the increase in the degree of mechanization and automation of production, the organic composition of capital has generally improved, and the general profit rate has shown a downward trend. The effect of the law of falling average profitability tends to sharpen the contradictions inherent in capitalist society to varying degrees.