Page 419 - Manual-of-Operation-Merged

CvSU MANUAL OF OPERATIONS
______________________________________________________________________
82

d. Profitability Analysis

To evaluate/analyze the project’s profitability/viability, some
ratios can be considered. These are as follows:

1. Return on working Capital = Net Income

Operating Expenses

It is the ratio of the net income over project’s working
capital (equivalent to the total operating expenses incurred in
generating the total revenues of the project) during the
production period.

2. Net Income = Total Revenue – Total Operating Expenses
The profitability of a project, regardless of its size, can be
determined by considering its net income on a per unit basis, as
indicated below:

3. Net Profit Margin = Net Income

Total Revenue
This ratio tells us how much net profit margin the project will
realize for every peso sale.

4. Return on Investment (ROI) = Net Income

Total Asset or Capital Investment

Type of Project Profitability Index (P)
1. Crops Net Income per Hectare

T 2. Poultry & livestock Net Income per bird
h per sow
i per cattle
s per goat
3. Other Projects Net Income per sack of feed
r per sack of coffee
a per kg of meat processed
t per kg of tilapia
i
o This shows the amount of the net earnings per peso invested in the
project. It is a more realistic estimate of the project’s earning power
during the production period since all resources are considered in the
profitability analysis.

82