The difference between real and nominal profit

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Comparison analysis
This approach involves comparing individual profitability indicators within a company or with similar parameters of competitors. Conducting a dynamic analysis allows you to assess the effectiveness of business activity as a whole and its attractiveness for investment.

Comparison analysis

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Benchmarking can provide detailed information about the profitability of a business in a specific industry. It can also help create an overall picture of the business's prospects, taking into account the position of other companies in the market.

Factor approach
Evaluation of financial profitability may include a factor approach that combines several different models. All of them are important for identifying the relationships between key profitability factors and are divided into three groups:

summary - used in cases where factors are summed up;

multiples - division of one factor by another is used;

multiplicative - based on the product of factors.

These models can be applied to create multi-factor combinations taking into account profitability ratios.

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Index analysis
This method of profitability analysis is suitable art director email list for companies of all industries and forms of ownership. It allows you to study both one enterprise and several companies simultaneously, using indices:

variable composition;

stable (unchanging) composition;

impact of structural shifts.

Indices indicate relative values ​​that may indicate various events. Conducting an analysis of profitability using the index method shows the change in the established indicators in dynamics for a certain period compared to previous periods of time.

Simple or nominal is the rate of profit without taking into account the impact of inflation. Over time, inflation partially or completely reduces the purchasing power of money. It can be noted that 1,000 rubles today is far from equal to 1,000 rubles thirty years ago.

To account for the time value of a currency, the discounting method can be used. When taking into account the impact of inflation, we are talking about the real (inflation-adjusted) rate of return.

Profitability and CAGR
These concepts are closely related. CAGR shows the average annual rate of return on investment over a period of more than 12 months, taking into account the growth values ​​of the indicator for different periods.