Abstract

Profitability indicators describe the result of the management process more comprehensively than profit, characterize the effectiveness and efficiency of management, because their value shows the ratio of the effect with cash or input resources. They are used to evaluate the performance of the enterprise, as well as an instrument of investment policy and pricing. Most often, in practice, agricultural enterprises calculate indicators that characterize the profitability of production costs, investment projects and profitability of sales. It is very important to calculate the profitability levels of each type of sold products and give them an estimate, which allows identifying the most profitable ones. Methodological approaches are proposed in order to determine the four levels of profitability of the sold products, which are clearly presented in tables and graphs. It is important to grade the levels of profitability for each type of sold product, and therefore, it is becoming possible to assess their degree of effectiveness or level of profitability. The purpose of the article is to provide teachers from higher educational institutions, as well as agricultural specialists with modern tools for assessing the effectiveness of sold products, in particular through application of an unconventional method. The presented study allows specialists of agricultural enterprises to determine on the basis of two coefficients (return on fixed and specific variable costs) the moderate, rational, optimal and high profitability of sold grain, sunflower, grapes and other products and based on them to justify the amount of expected profit.

Highlights

  • Profitability indicators describe the outcome of the managerial process more comprehensively than profit because their values present the effect achieved as a function of the required cash or resource inputs

  • It is known that fixed costs per hectare (FC) and variable costs per unit (AVC) are not affected by the yield per hectare

  • The studies have shown that the moderate profitability of products ensures simple reproduction, in which the profit per hectare of sowing should not be lower than the value of fixed costs

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Summary

Introduction

Profitability indicators describe the outcome of the managerial process more comprehensively than profit because their values present the effect achieved as a function of the required cash or resource inputs. These indicators are applied to assess the farm’s performance and as an investment policy and pricing tool. Agricultural enterprises calculate certain values that describe the profitability of production costs, investment projects and sales. It is very important to calculate and to assess the profitability of each type of sold products in order to identify the most profitable ones

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