PROFITABILITY OF THE MUNICIPAL ENTERPRISE AND MAIN AREAS OF ITS INCREASES - Scientific conference
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Рік заснування видання - 2014

PROFITABILITY OF THE MUNICIPAL ENTERPRISE AND MAIN AREAS OF ITS INCREASES

04.10.2018 10:50

[Section 1. Economy, organization and administration of enterprises, branches and complexes]

Author: Zazhyrielova Oleksandra Sergeevna, master's degree, Kyiv National University of Technologies and Design


Profit is a main mover power of economy and also is a main motive of activity and guarantee of progress of socio economic system. It is considered that profit is not generalization of the activity of any enterprise. But using of profit is not enough for performance evaluation, because its availability does not guarantee that enterprise is working good. [2, с. 276].

As you know municipal enterprises are independent subjects, who are making commercial, researching, productive activity with the purpose of getting profit. Municipal enterprises are subordinated to controlled and accountable bodies of local self-government and their executive committees are controlling the using of profit of these enterprises. [2, с. 277].

Municipal enterprise can make commercial activity, the result of it is getting profit, and the part of it gets into the local budget. In the accounting position 1«general requirements for financial statements» has next definition of the term «profit», according to it profit is a sum in which the income exceeds the costs associated with it. [5].

According to the current legislation and acts, municipal enterprise can pay off, and local authorities set tariffs, which depend on the need for reimbursement. [4, с. 106]. While planning these tariffs the enterprise calculates the necessary amount of funds for the financing of capital investments (over depreciation included in operation expenses). The amount of these payments should be equal to the amount of profit after tax, that is, the amount of net profit. [3].The impact of capital investments on the financial condition of the enterprise and tariffs should be reflected in the operational and financial budgets, that is, the budget of funds and the forecast financial statements. [4, с. 107].

Utilities may plan to generate profits for specific purposes, specifically for [3]:

- execution of investment programs (creation of reserve funds and realization of expenses for capital investments)

- repayment of bonds, loans, credits attracted to finance capital investments (if these payments require more funds than the company receives upon repayment of depreciation charges)

- ensuring the profitability of equity (for enterprises created with the attraction of private capital)

- settlement of obligations under settlements with creditors in the amount that is equivalent to uncovered losses of past periods.

Most of municipal enterprises in Ukraine are working unprofitably and ineffective.This indicates that the overwhelming majority of this type of enterprises in the country are low-profitable - financially unstable, economically weak and unable to provide in modern conditions financing of investment processes of production (works, services) of innovation activity (introduction of new technologies, purchase of new equipment, etc. .), at the expense of their own funds, as well as their reproduction at an adequate level [4, с.107]. Therefore, raising the level of profitability of utilities is relevant more than ever now.

An analysis of the factors that cause changes in profit margin allows us to identify ways to increase it. They belong to them [1, с.378]:

-  The use of financial, marketing and tax technologies by the authorities in shaping the directions of management by utilities;

- the development of an effective tariff policy in which utilities will be able to profit from good work;

- improvement of organization, as well as deepening the specialization of production and sales of products (services, works); namely: the creation of specialized units and brigades (for the provision of services and works) and their transfer to the conditions of self-financing;

- involvement of audit firms, insurance companies to improve the process of minimization and risk planning;

- increase of competitiveness and product quality;

- increase in income from other activities of the enterprise (sale of securities, fixed assets, other property, etc.);

- improvement of the organization of work of local authorities responsible for the management of social objects transfered to communal property;

- introduction of mandatory formation of depreciation funds;

- attraction of financing on the rights of shareholders of enterprises of city inhabitants;

- reducing the cost of production and sales of products by increasing the efficiency of the use of financial, material and labor resources.

These ways of increasing the profit of a utility company make it possible to apply an expanded process of reproduction of production (services, works) and increase the stability, competitiveness, liquidity, and also improve the state of solving social problems of the enterprise. [4, с. 105].In particular, the creation of a flexible system of accounting, assessment, analysis and control of utility companies in the future may become a major factor in improving the efficiency of communal property management in general.

References

1. Boychik I.M.  Business Economics: Textbook.  / I. M. Boychik.  - K.: Condor Publishing, 2016. - 378 pp.

2. Kalchenko O. M. Functional Purpose of the Profit Management System of the Enterprise / O. M. Kalchenko, O. V. Shishkina, O. V. Anikaychik // Business Economics: Modern Problems of Theory and Practice: Materials of the Fifth International.  science-practice  Conf., September 15-16, 2016. - Odessa, Atlanta, 2016. - P. 276-277

3. Kozynets G. Improving Financing of Utility Companies / G. Kozinets, S. Popova [Electronic resource].  - Mode of access: www.kntu.kr.ua

4. Mishchenko K. Profitability of the enterprise and ways of its increase / K. Mishchenko // International Science.  - 2017 - No. 2 (2).  - P. 105-107

5. Regulation (Standard) of Accounting 1 "General Requirements for Financial Statements" of 02/28/2012 N 336/22868: latest revision dated 17.02.2017.  [Electronic resource] / Ministry of Finance of Ukraine.  - Mode of access: http://zakon2.rada.gov.ua/laws/show/z0336-13

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Науковий керівник: Здір Віктор Анатолійович, кандидат економічних наук



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