Page 419 - Manual-of-Operation-Merged
P. 419

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
   414   415   416   417   418   419   420   421   422   423   424