What Is Profitability Ratio Analysis?

Also called profitability analysis, an enterprise uses professional tools and methods to determine whether a certain part of the business is a profit or a loss.

Profitability analysis

The main purpose of profitability analysis is to analyze the behavior of companies from the perspective of external markets.

Profitability analysis Profit analysis classification

This analysis helps companies understand the profitability and change trends of companies in different markets, thereby helping corporate decision makers to quickly provide a basis for decision-making on product pricing, customer selection, distribution channels, and sales terms. This is especially true in the highly competitive low-profit industry Important, more detailed discussion of system implementation will follow

Analysis analyzes profits from an external market perspective, while profit centers analyze profits from an internal management unit perspective.

Profitability Analysis Profit Center Module

In the profit center module, you can divide the profit center according to products, regions, and management functions ( production, sales, finance, etc. ). In addition, in the SAP profit center module, if you transfer the balance sheet items to the profit center by period, In order to analyze some typical financial indicators such as the return on investment, cash flow, and sales profit margin of the profit center, the profit center is now expanded into an investment center.The profit center module provides information on the cost of revenue for customers and products. If these two basic profit analysis dimensions are sufficient, I don't recommend that they start the profit analysis module, and the number of startup modules will increase dramatically to account for the hard disk.

Method for analyzing profit center of profitability

Dividing the profit center is certain, the usual methods of dividing the profit center are:

a . Generate a profit center from a cost center ( group ). In fact, the profit center serves as a concept of a group cost center.

b . Dividing the subordinate units of the group into profit centers according to the business scope, which can avoid the establishment of multi-company codes for subordinate units, and subordinate units can issue related reports according to the profit center.

c. Dividing the profit center according to the finished product or region. When it comes to this, talk about the business scope (business department), such as a large electronics group, the color TV business department, the communication business department, etc. About the profit center and business scope, there are some folk sayings:

i: The profit center was later designed to replace the business area.

ii : Simply understand that the business scope is the concept of FI and the profit center is the concept of CO.

First , the configuration of BA is placed in the FI module, while the profit center (CO-PCA) is in the CO module.

The second is that BA actually shares a set of tables with FI's general ledger Ledger 0 (the FI line item BSEG and the general ledger balance table GLT0 have business scope fields ), which means that business scope adjustment can only be done through FI Posting (of course, including FICO, Reconciliation, the previous section on FICO reconciliation also introduced its principle in detail ), if the business scope needs to be adjusted, obviously a lot of junk FI certificates are not suitable, and we know that the profit center completely uses another account called Ledger 8A .

iii. Larger companies may use both the business scope and the profit center. In addition to the configuration on both sides, a data control problem is left. Therefore, in the new version of ERP, it is preferred to no longer use the business scope and introduce a new Organization unit concept-Segment (report segment), Segment is set in the profit center master data, which greatly simplifies the configuration and business.

Profit analysis always calculates profits through Cost-of-sales accouting (in other words, profit analysis always starts from the sales module ), while the profit center module can use the cost of sales method and period accounting Method (Period Accouting) to calculate profits.

The cost of sales method is similar to the concept of China's profit and loss statement, and it starts from the cost of sales revenue to obtain the net profit in a multi-step manner.