ENTERPRISE PROFIT AND PROFITABILITY: WHY GROWTH IN ABSOLUTE FINANCIAL RESULTS DOES NOT ALWAYS MEAN HIGHER ECONOMIC EFFICIENCY

Abstract

The article examines a methodological problem of distinguishing between profit and profitability indicators in assessing the economic efficiency of an enterprise. Using the example of three major Uzbek economic entities — Uzmetkombinat JSC, Uzbektelecom JSC, and Kapitalbank JSCB — it is shown that an absolute increase in net profit does not always correspond to growth in relative efficiency indicators (return on sales, return on assets, return on equity) and can sometimes mask a deterioration in an enterprise's financial condition. It is established that enterprises with comparable or higher revenue may demonstrate profitability several times lower than companies with smaller absolute profit, which is explained by cost structure, debt burden, and the financial leverage effect. Kapitalbank's ratios are compared with the average profitability of Uzbekistan's banking sector. The necessity of using a system of relative profitability indicators, rather than the absolute value of profit, as the primary criterion for assessing the economic efficiency of an enterprise is substantiated. Practical recommendations on applying the DuPont model for factor analysis of return on equity are proposed.