Analysis of the Operation and Financial Condition of the Enterprise

Analysis of the Operation and Financial Condition of the Enterprisefinal point is the net income or loss of the reporting period. This statement shows the taxableshare of profit and the items that either increase or reduce this share of profit.For financial decision-making a clear and accurate breakdown of revenue andexpenditure is required as well as the analysis of the effect of the enterprise internal factors onthe efficiency of business performance of the enterprise.Clear and accurate classification of revenue and expense is the basis for assessment ofthe enterprise performance result. Besides, such classification is also required for thefollowing: identification of source for the main share of income/profit in the periodreported; segregation of the prime cost of production and non-production expensesincluding the separation of the management and sales expenses; identification of the fixed and variable costs for the purposes of analysis.Net turnover is the revenue form sales of goods and services less VAT and excise taxamounts as well as the discounts given to customers that are calculated based on the salesrevenue and the value of the goods returned.Production costs of goods sold includes the following elements: materials, salaries ofproduction personnel, other direct, as well as indirect costs involved in production.Gross profit is the excess of net turnover over the production cost of the goods sold.This figure allows analysing the efficiency of the enterprise production activities.Cost of sales includes the costs of advertising, packing, consignment and carriage,insurance and other costs.Administrative costs include rent payments, costs of equipment maintenance andrepairs, administration personnel salaries, business trip expenses, telephone and telegraph etc.expenses.At this stage the difference obtained at this stage of calculation of the financial outcomeis called operating profit or loss.Enterprise operating profit or loss shows the effect of the general, administrative andselling costs on the financial outcome of an enterprise.Profit from financial operations is the net of income and expenses form the financialtransactions performed by an enterprise. This figure is necessary to split the area of theoperating performance from such sources of income as the receipt of interest or dividendsfrom the capital invested in other enterprises, from currency transactions etc. sources.Profit before tax is the object of taxation by the income tax.Extraordinary charges and credits are miscellaneous amounts that unrelated withnormal day-to-day activities of an enterprise, for example, losses due to force majeureconditions etc.Net profit is the share of the enterprise profit left at the disposal of the enterprise afterdeduction of the income tax. In conditions of a free market economy this is the main measureof enterprise performance. This is exactly the figure that is kept in the scope of attention of theenterprise managers, shareholder and financial markets. Existence of the enterprise, thenumber of jobs for the employees and the payment of dividends depend on the dynamics ofthis figure.Enterprise net profit is distributed according to annual meeting of shareholders decision.The elements of undistributed profit are as follows:57