Help on Tele2, tariffs, questions

The essence of the economic effect

In order to identify the main ways to improve social and economic efficiency management of Russian organizations, it is necessary to evaluate the effect. The effect can be represented as an absolute value, which can be used to reflect the achievable result in the process of performing a certain procedure.

Definition 1

Economic effects are the result of the use of human labor, which can be directed to the creation of certain material benefits. In this case, it is important not only to ensure the result, but also to determine how it was achieved.

As a basis for calculating economic efficiency, specialists should take the annual economic effect, including the costs of achieving it. In addition, in addition to the absolute magnitude of the effect, the magnitude of the effect is needed, which is calculated by the ratio of the total result obtained to the cost of resources to obtain it.

Efficiency can be determined by the degree of profitability. Performance indicators are relative and are used for comparison with the existing standard or with other effect options.

Benefit from the implementation of the effect can be determined through three circumstances:

• minimum costs for events,
• maximum effect from the implementation,
• duration of the effect.

In accordance with the economic efficiency of what needs to be measured, capital investments for the acquisition of new equipment, technologies, fixed assets, Money that are invested in a particular project.

Thus, we can say that the economic effect is the result of the used human labor aimed at creating appropriate benefits or a better result.

In this case, it is important not only to ensure the result itself, but also the forces with the help of which the result was achieved. For this reason, economic efficiency is calculated through the annual economic effect, including the costs or costs of achieving it.

In addition, after determining the absolute value of the effect, the relative value is determined, which is calculated through the ratio of the overall result to the cost of resources to obtain the effect.

Formula of economic effect

The economic effect formula characterizes the final economic result resulting from the introduction and implementation of appropriate activities that can improve the performance of the company.

The best result is an absolute indicator, which is measured in monetary units.

AT general view obtaining the effect is based on the initial implementation of certain costs, and in the future in obtaining an additional amount of profit from the activities carried out. In general, the economic effect can be expressed in the form of additional income that the organization can receive through additional profit, minimization of labor and material costs, growth in production volumes, increase in the quality of products, expressed in price.

There is no specific formula for the effect, but several different formulas are often used in calculations. So, the total amount of economic effect can be determined as follows:

$Etotal \u003d (NR - SR) - Z$, where:

• $НР$ – new result,
• $SR$ - old result,
• $3$ is the discounted amount of costs for the entire period of implementation and implementation of changes.

The annual amount of the economic effect is determined in accordance with the formula:

$GE \u003d (NR - SR) - Z GO $

$GO$ - the annual standard amount of return on investment.

The value of the economic effect formula

The essence and significance of the formula for calculating the economic effect is to determine the degree of efficiency, which in turn is able to determine the degree of profitability. The effect indicator is considered relative, for this reason it is most often used when compared with the existing standard.

In a general sense, the benefits from the implementation of the effect are characterized by several facts: the costs of the measures taken should be small, the effects from the implementation should be large, preferably maximum, the period during which the effect is expected to occur.

Depending on the nature of the measures taken to increase the effect, its calculation is carried out in different ways. There is no general formula for the economic effect; it is determined according to the sources of obtaining this effect.

If during the calculation it is necessary to obtain the annual effect from the implementation of measures, then in order to obtain total amount effect, it is necessary to multiply it by the number of years that this effect can bring.

Sources of problems effective management in Russian organizations mainly lie in the low quality of management personnel. In Russian practice, a small number of persons who have the practice of effective management. The bulk of managers receive only theoretical knowledge in universities, without reinforcing them with practice. For this reason, individuals with little life and managerial experience are included in the work.

Another important problem of management efficiency in Russia is high share corruption at all levels of government. If we consider the practice of management in Western states, then there public managers are separated from the distribution of material wealth. In our country, there is a large proportion of officials who become owners of large fortunes.

Remark 1

The low efficiency of management at the state level is also associated with a large number of managers, since in Russia it is management public resources is a profitable and efficient business. At the same time, the sector of private enterprises lacks highly qualified high-level specialists.

If we consider enterprises separately, then the main problem of management lies in the inefficient use of their working time by Russian managers.

How to determine the main indicators of economic efficiency? What methods of calculation of indicators can be used? Let's talk about it in the article.

You will learn:

• What is the essence of the economic efficiency of the enterprise, why should it be calculated.
• What indicators for evaluating economic efficiency are known.
• What formulas can be used to calculate economic efficiency indicators commercial activities.
• What are the methods for calculating economic efficiency indicators.

What is the essence of the calculation of economic efficiency

The economic efficiency of an enterprise is the overall performance of its commercial activities, which is expressed in the ratio of the product obtained and the resources expended. To obtain the coefficient of economic efficiency, it is necessary to correlate the indicators of profitability of the enterprise and total costs for the resources used. Business project will be effective if the first indicator exceeds the second component.

Indicators for calculating the economic efficiency of an enterprise

The system of indicators of overall economic efficiency includes estimated indicators and indicators for the types of resources used. The key performance indicator of an organization is always profit. Estimated also include the following indicators: product profitability, profitability of production assets, relative savings of fixed and working capital.

These indicators are needed for the development and implementation of new equipment, solutions production issues, including the use of interchangeable materials and products, as well as in the design of construction and reconstruction, the preparation of business plans, the choice of schemes for organizing production in technological and scientific activities.

How are benchmarks determined? To do this, as the value of the economic effect, the savings obtained from the reduction production cost, and as costs - additional capital investments that caused these savings.

Comparative economic efficiency is determined by choosing one of two or more options for solving a particular commercial or economic problem. Thus, you get a characterization of the advantages of one option compared to others.

When comparing two options, a different ratio of the necessary capital investments and the cost of production. The option that requires less capital investment, while providing the lowest cost of production, is recognized as economically viable.

When comparing options, it is necessary to use the reduced costs calculated for each of them. The costs shown for each option are the sum capital investments and running costs(cost), reduced to a single dimension in accordance with the efficiency standard.

It is also important to understand that the selection of economic indicators is determined by the goals of the functioning of the system under study. For example, when establishing indicators of the comparative economic efficiency of an enterprise in the field of animal husbandry, it is necessary to focus on the growth in production volume, the growth of labor productivity, the payback of the feed used and other costs. Based on this, the following system of indicators can be established: gross and marketable output per animal, labor productivity, feed payment and cost recovery.

Economic efficiency: calculation formula

The general formula for calculating efficiency is as follows:

E \u003d R / Z, where:

R– production results;

W- the cost of obtaining this result.

It is quite difficult to apply such an efficiency formula in practice, since the numerator and denominator of a fraction in most cases cannot be quantified and cannot be calculated in general units. In most cases, the results of the commercial activities of the enterprise are diverse and combine them into overall result impossible. In some cases, the result is not expressed in numerical form at all, and can only be qualitative.

Efficiency can be determined in 2 ways:

• As the ratio of the result of production to the cost of its implementation.
• As the ratio of the result of what was produced to what had to be abandoned when choosing an alternative.

How to calculate economic efficiency indicators

You can consider the features of the calculation of the main indicators of the economic efficiency of the enterprise. For example, these include profitability, cost, financial condition and financial and resource management.

Profitability indicators show the ratio of profit to costs, investments, investment costs, that is, they characterize the share of profit per unit of invested costs:

• profitability of products (services) R pr i , i.e. the ratio of the profit of the product (P i) to the cost (С i) of the manufactured unit of production,%:

This indicator is used to identify the most cost-effective products;

• economic profitability of the company's assets (Rf), i.e. the ratio of the annual profit (P year) to the assets of the enterprise (K act) or the sum of the main (K main) and working (K turnover) capital,%:

Level Rf demonstrates the efficiency of the enterprise (use of assets), i.e. shows the share of profit attributable to 1 dollar of assets. P year includes book profit(P ball) plus interest on the loan attributable to cost.

• profitability equity companies (R sc), i.e. the ratio of the company's net annual profit (after taxation) to the equity capital at the end of the reporting period (K int), %:

• return on capital employed (R uk, %) shows the efficiency of both equity and borrowed capital (credits, loans, loans) of the company and is calculated by the formula:

The balance sheet of the company at the beginning and end of each reporting period reflects the cost data on fixed assets - the initial cost, the amount of depreciation ( depreciation), residual value.

During the year, there is a movement of fixed assets, so their availability in accounting is shown monthly. The cost of fixed assets at the end of the period (K of.k) is determined according to the balance sheet:

To off.nach - the cost of fixed assets at the beginning of the period;
To of.p - the cost of acquired fixed assets;
To of.v - the cost of retired fixed assets.

The cost of the purchased equipment includes: the purchase price, transportation costs, insurance, assembly, installation, adjustment.

To assess the level of use of fixed assets, it is necessary to have information on the average annual cost of fixed assets (K cf.).

To office nach - the value of fixed assets at the beginning of the year;
To office k - the value of fixed assets at the end of the year.

How to learn to manage expenses: case

The manager needs to be able to manage the budget of his company. The editors of the magazine " Commercial Director» has compiled a detailed algorithm in order to learn how to competently manage costs and get the maximum benefit at the lowest cost.

Methods for calculating economic efficiency indicators

After we have decided on the systems of the main indicators of economic efficiency, we need to work out the methods of calculation.

Absolute criteria will help analyze the main dynamics of various profit indicators for a certain number of years:

• economic;
• accounting;
• received from sales;
• calculated in its purest form.

Such indicators are more related to arithmetic calculation than to economic. The figures will be obtained in their pure form without taking into account inflationary processes. At the same time, relative indicators will have certain advantages in terms of the fact that they are not subject to inflation.

The calculation of economic efficiency indicators is the volume of products manufactured, work performed or services rendered. They are the basis for meeting all needs, for improving the material condition.

Economic efficiency indicators include:

• The payback of the main costs is the ratio of the volume of gross output to the total cost of living and materialized labor, which is a generalized indicator.
• Profit is the realized part of income in its pure form. The concepts of conducted costs also imply different concepts of making a profit. In the field of economic science, the term profit refers to a meaning that differs from the definition in accounting reports.
• Receipt net profit. Includes all net income and payroll. This is the main source of consumption and certain accumulation. In most enterprises, such indicators can only be determined by calculation. Therefore, the obtained "clean" products do not always reflect the actual level of efficiency and the dynamics of production development with maximum accuracy.

Nearing completion of the business plan investment project the general picture of how effective investments in an event can become in the complex of considered aspects becomes clear. It must be admitted that preliminary and estimated valuation activities require high competence in the field of financial and analytical practice. This is due to the fact that project performance indicators in terms of composition and combinatorics go far beyond the assessment of local investment effects and depend on numerous factors.

Preparatory measures for calculations

The calculation of investment project (IP) performance indicators is based on the information base prepared by the entire course of the preparatory and actual planning work. The quality of the original and primary processed information is of paramount importance. In second place is the type of project corresponding to the stage life cycle the designer, on the third - the types of efficiency under consideration, etc. An important role is played by the ratio of the effects of various stages of the project. All this, to one degree or another, affects the algorithm for preparing for calculations, calculations and conclusions based on their results.

Types of performance indicators

Criteria for successful implementation Evaluation of the effectiveness of projects over the past decades have received serious development. Qualitative and quantitative characteristics of the financial and economic orientation in their expression absorbed the basic postulates financial management, AHD of the enterprise, methods of data evaluation management accounting. But the central place in them is occupied by the theory and practice of investment analysis, which is also subject to evolution in the direction systems approach. Of fundamental importance are Guidelines on the evaluation of the effectiveness of investment projects (II edition), issued in mid-1999.

It is these recommendations that lay the foundation for understanding the analysis of investments in fixed assets from the standpoint of a holistic view. Versatility allows you to come close to the division of performance indicators into types, based on the target orientation of the analysis. The purpose of the analysis, of course, depends on the request of stakeholders who want to find an acceptable decision to participate in or start the implementation of a unique task.

However, in addition to the target orientation for the classification of indicators, other criteria can be applied, such as:

• the nature of the results and costs, among which social and environmental effects, for example, cannot be ignored;
• the method of using the time factor, which determines a number of possible distortions in the value of the benefits and costs received from IP;
• the period of accounting for results and costs for the purposes of performance evaluation;
• type of summary indicator;
• the subject of IP efficiency evaluation.

The criteria presented are not exclusive. Among them, two stand out (by the target and by the subject of assessment), for which the signs of dividing the indicators make it possible to find the characteristics that determine the weighted decision. The classification model of performance indicators is shown below.

Classification of project performance indicators

Local indicators of investment efficiency (NPV, PI, IRR, MIRR, PP, DPP) on our website are given detailed attention in separate thematic articles. We have characterized the types of IP effectiveness in the material devoted to. Let me remind you of the main types of performance indicators, divided by target orientation. These are specialized evaluation criteria:

• public efficiency of IP;
• commercial effectiveness of the project;
• the effectiveness of the company's participation in the investment event;
• the effectiveness of investing in the company's shares;
• budget efficiency;
• efficiency from the perspective of higher-level structures.

Algorithm for preparing and calculating indicators

The process of forming an information basis for calculating IP assessment indicators is the result of the implementation of measures to develop a business plan and covers almost all of its stages. It is executed iteratively, has many cycles in which you can “circle” for a very long time, increasing the quality of numbers by taking into account an increasing number of influencing factors. It's not worth getting into it. We will consider the algorithm for preparing financial and economic information without taking into account cyclic dependence, so as not to turn the article into a long and confusing story. In the center of the section, a diagram of a typical algorithm for preparing data for efficiency analysis is presented.

Step one

Formation of the planned and normative foundation for calculating the main items of the revenue and expenditure parts of the project throughout its entire length (in the diagram, fragments of the step are highlighted in light blue). Qualitative and quantitative parameters of sales, required equipment, construction and installation works, budgetary and regulatory platform are collected and consolidated. Analysis of statistics and standards (for an existing enterprise), benchmarking (for a newly designed business) are of lasting importance in order to then have integral characteristics of IP. Consumption rates for goods and materials, their stocks, labor and technological standards, tax model and prices - all this is necessary for budget planning and subsequent assessment.

step two

Preparation and rechecking of key parameters of the dynamics of project events. At the same time, the accrual method, traditional for economic practice, is used first. This step involves a sequence of actions for planning the next values ​​with a certain logic for the formation of information blocks.

1. The volume of production and sales revenue before the start of the project, during the implementation of the project and after its completion.
2. Amounts and schedule of capital investments.
3. Dynamics of changes in the residual and average annual value of non-current assets (fixed assets, intangible assets) of the company in connection with the implementation of IP. It naturally implies the possibility of calculating the amount of depreciation and property tax.
4. Rolling up current costs economic activity subject in connection with the implementation of IP in the calculation of the cost of planned products (services).
5. Based on the production program of the project and the sales plan, the formation of cost structures for the estimated periods of activity, up to the planned reporting periods.
6. Calculation of the amount of investments in the working capital material assets, as well as stable liabilities, such as, for example, debt on wages to personnel, reserves for future payments, etc.
7. Calculation of planned profit values ​​in its standard forms and amounts of income tax planned to be paid in accordance with the requirements of the legislation.

Scheme of the algorithm for preparing for the calculation of IP performance indicators

Step Three

Development of three main project budgets: income and expenditure budget (BDR), balance sheet budget (BBL) and financial and investment budget (FIB or cash flow plan) of the project. The main budgets are inextricably linked not only with each other, but also determine the possibility of calculating two key groups of performance indicators. These include parameters of business reliability in the conditions of ongoing work on the project and indicators of economic efficiency of investments.

Step Four

The choice of compositions of indicators and the actual implementation of their calculations.

Financial budgets as sources of calculations

As we noted earlier, the forms and methods for assessing the economic efficiency of investment projects are based on the data of the three main budgets. The first budget in its structure repeats the content of the income statement. This form serves to illustrate a company's comparable revenues arising from its supply chain and expenses over comparable time periods. Naturally, they should be considered in relation to the main processes implemented in connection with the planned investments.

It is worth noting that actually financial results is an independent indicator involved in a comprehensive assessment of the effectiveness of IP. Its absolute values ​​have their own value both for the organization-designer and for the investor, even until the moment of refining the profit in such relative forms as, for example, profitability. In the traditional context, the financial result is used in the analysis of the effectiveness of economic activity and to search for reserves to increase it through an itemized analysis of income and expenses.

The calculation of income tax (USNO tax, if the business entity is planned (is) on a simplified system) should be carried out taking into account all the nuances of current legislation. In general, tax planning has a significant impact on the effectiveness of the project, so it is advisable to involve professional tax consultants for this work. I'm not talking about the legal model, which is an integral part of tax planning and provides, albeit small, but quite definite opportunities for economic maneuvering.

Balance sheet budget - the second main form financial plan project. It is a table with two parts. In the first of them, according to a given structure, the balances of funds and their placement are presented, and in the second - the balances of sources of funds. Balance - a static form of assessing the financial condition of the company. This distinguishes it from the profit and loss budget and the cash flow budget, which are dynamic plans of income and expenses (cash inflows and outflows). For the purposes of evaluating the effectiveness of the balance sheet budget, it is sufficient to develop it on an enlarged basis, at least at the level typical structure assets and liabilities.

In the article on the issue of planning the financial and investment budget (plan for the movement of the DS) of the project, enough attention is paid. This model of planned project cash flows is the main document for investment analysis and determination key indicators efficiency. The model is based on the notorious Cash Flow methodology. There are a number of significant differences between this approach and the accrual method that separate the FIB from the BDR. The main difference is in the calculation of depreciation, which in cash flows missing.

Calculation of profitability and turnover indicators

As we remember, an investment project goes through three main stages: pre-investment, investment and operational. Accordingly, when evaluating the effectiveness of the project, it is advisable to consider two groups of performance indicators.

1. Performance indicators of the operational stage and indicators of the financial condition of the company (data sources: BDR and BLL).
2. Investment efficiency indicators calculated on the basis of financial and investment budget data (according to the cash flow method).

The first large group of indicators is often referred to by financiers as "reliability criteria" for doing business. This means that the project should not damage the financial condition of the company, undermine its stability, independence, solvency, and lead to a decrease in profitability. In their pure form, these indicators cannot be considered as evaluating efficiency in its literal sense. However, from the standpoint of project evaluation as a holistic phenomenon, they are certainly included in the complex of system parameters for IP evaluation.

To implement the settlement complex of the first group, only quantitative criteria of financial management are used. Financial reliability includes such integral characteristics as profitability, financial condition criteria, break-even point calculations and financial leverage. Profitability is the most accessible, but very informative parameter of this group. There are several types of profitability and turnover related to the same number of indicators:

• return on assets (ROA);
• return on equity (ROE);
• return on investment (ROI, ROIC, ROACE);
• profitability invested capital(ROP);
• return on sales (ROS);
• asset turnover ratio (TAT);
• inventory turnover index (ITR).

To the greatest extent, we will be interested in several of the parameters presented above. One of them is dedicated separate article about . The most recent measure of return on investment is return on average capital employed (ROACE). Equally important for the implementation of a comprehensive performance assessment is the ROP indicator (return on invested capital). It characterizes the company's ability to create profit in relation to the project, regardless of how it is financed. This parameter can be calculated using the formula below.

Return on Invested Capital Formula

Financial indicators and additional analytics

The current and prospective financial condition of the company is associated with the project. Investments are not always able to bring benefit to the enterprise-designer. With carelessness, his financial condition may be subject to a number of risks of worsening credit history and even bankruptcy. Therefore, the analysis uses special criteria for the risk-free implementation of an investment in an IP. They define five subgroups of indicators, for the calculation of which the information of the BBL and BDR of the project is used.

The first subgroup is responsible for assessing the solvency of the company. By it we will understand the ability to meet the existing long-term obligations of the enterprise without the need to liquidate long-term assets. These indicators just allow us to assess the risk of the threat of bankruptcy. These include the following criteria.

1. DAR (Dept Ratio to Assets Ratio). The ratio of the company's total liabilities to its total assets, showing how much the company's assets are supported borrowed capital. The formula below allows you to calculate the indicator.
2. DER (Total dept to Equity Ratio). Attitude borrowed money to the company's own funds shows how many total liabilities of the company account for one ruble of its own funds. In Russia, this indicator is called the financial independence ratio or financial leverage (see the formula below).
3. TIE (Times Interest Earned Ratio). Interest coverage index. This is a measure of the company's debt service. In domestic financial management, the indicator is often called the interest coverage ratio (see the formula below).

Formulas DAR, DER, TIE in a comprehensive assessment of IP effectiveness

The second subgroup of indicators is responsible for assessing the company's liquidity. This subgroup includes criteria for the current and absolute liquidity. Under the liquidity of assets, we mean the rate at which an asset is converted into cash without a significant loss in value. The first indicator makes it possible to assess the company's ability to meet the requirements for short-term liabilities using current assets, and the second - the most liquid of them. Qualitative differences between these indicators are not so great, however, they are. To implement the calculations, the formulas presented below are used.

Formulas of current and absolute liquidity

The remaining three subgroups of indicators are even further from investment analysis than profitability, solvency and liquidity. However, for a holistic view of the reliability of the project for the general condition of the company, they are also important. It's about about the stability of the company, the state of relations with customers (accounts receivable), break-even analysis and financial leverage. The stability of the company is determined by the dynamics of such criteria as working capital and net working capital. An equally important role is played by the parameters of sales volume at the break-even point and the level of the company's profit margin in connection with the planned IP. Finally, the effect of financial leverage helps to understand how the changed capital structure, caused by attracting additional sources to the project, can affect the financial result as a whole.

Conclusion

In this article, I deliberately limited myself to the subject area of ​​auxiliary tools for a comprehensive assessment of the effectiveness of investments. Many authors focus entirely on the indicators of investment analysis based on the study of cash flows. However, the economic efficiency of the project cannot be limited to 5-6 criteria that use only cash flow. This is due to the fact that in most cases IP is integrated into the entire set of company processes and affects many aspects of the enterprise's economy. A project is a dependent and influencing subsystem.

This position does not in the least detract from the importance of the research complex NPV, PI, DPP, IRR, etc. In addition to the fact that each of these parameters has already been analyzed separately, there is still not a single immersion in through examples of calculations. This is necessary so that together we can clarify the logic of making decisions based on patterns and certain normative recommendations. There is no universal formula for action here. Evaluation of criteria is always a compromise of both interests and conclusions based on the results of dynamic simulation.

What pleases? Very slowly, gradually, recommendations on the development of methods for the normative comparison of numerous parameters begin to appear in the sources. Much can already be taken from the theory and practice of financial management today. For example, the same reference values ​​for liquidity, independence, stability, etc. And, of course, from the standpoint of practice, the challenge is financial directors: regularly benchmark and build the analytical capacity of financial ratios. And the financial analysis for a separate company, and the assessment of the economic efficiency of an investment project in a localized format will only benefit from this.

To calculate the economic efficiency of the company means to understand whether the resources are spent correctly and what are the prospects for the development of the enterprise. We tell you how to correctly calculate the indicator and draw the necessary conclusions from the result.

The concept of performance efficiency

Let's start with the term "efficient". An effective result means an optimal result with minimal costs: investing a minimum at the input, the maximum possible is obtained at the output. Information on how justified the investment, what is the performance of the company, gives the calculation of efficiency - an indicator that characterizes the optimal use of resources.

If an entrepreneur seeks not just to make ends meet, but to seriously build a business, then it is necessary to build a system for evaluating the result. There is not always time to delve into calculations and mathematical formulas on your own. The specialists of the Chief Accountant Assistant will help you determine the break-even point and calculate the amount of expenses for the period ahead.

The parameter demonstrates the competitiveness of the business, so a self-respecting entrepreneur should not only be familiar with the formulas, but also be able to draw conclusions from the calculations to adjust the business strategy and financial planning.

Without striving to get the maximum efficiency from the available resources (material, personnel, managerial), the result will be uncompetitive. Funds must be distributed in such a way that the maximum possible profit is extracted, therefore, we will analyze economic efficiency according to the calculation formula and with variants of examples.

Efficiency mark

The basis for calculating the indicator is the ratio of the result of the work and the costs of obtaining it. The parameter reflects how efficiently the company works and how it is able to master the maximum volume of production or resale of products using available resources at the lowest cost.

Let's analyze an example on specific data:

Entrepreneur Luchinkin decided to open his own business, but did not choose the type of activity. As a result, Luchinkin decides to test 2 diversified areas at once - a hairdressing salon and repair services for premises, distributing investments equally by 200 thousand rubles.

At the end of the year, Luchinkin calculated the proceeds: 450 thousand rubles were received from repair services, 260 thousand rubles from the hairdresser, which is almost 2 times lower.

As a result, it is clearly clear where the return on investment is greater. That is, the cost-effectiveness of the repair is higher than that of hairdressing services.

Thus, economic efficiency is determined from the ratio of the result to the funds spent. If the product is in monetary terms does not require high costs, then an economic effect in the form of profit is achieved, otherwise - a loss.

Economic efficiency indicators

A quantitative parameter is required to evaluate the success of a commercial project. The general formula for calculating efficiency is as follows:

E \u003d RD / Z, where

RD - the result of activity,

Z - costs.

A profitable project should not have an index less than 1. In our example, in both cases the result is greater than one, and the value of E (2.25) for repairs is higher than for hairdressing (1.3).

However, performance is evaluated primarily in terms of profitability. This is a clear evaluation criterion: an unprofitable business does not make a profit. For the very same simple analysis serves as the indicator "gross profit" and the formula for economic efficiency will be as follows:

VP \u003d RD - Z, where

VP - gross profit,

RD - the result of activity, income received,

Z - costs, cost.

Then in our example:

• VP from a hairdresser \u003d 260,000 - 200,000 \u003d 60,000 rubles;
• VP from repairs = 450000 - 200000 = 250000.
• Conclusion: activity from repair services is more effective than from a hairdressing service, and can bring more profit.

If accounting terms cause you difficulties, article "What is the difference between profit and revenue" explains the commonality and difference between these indicators.

Compare business with competitors or with own results for the past period absolute indicator not enough. Such an analysis does not show the true situation, since a company with a smaller volume of sales may be more efficient and financially stable. Therefore, a relative value is also required when assessing the effect achieved, that is, the profitability ratio. This parameter plays the role of efficiency and evaluates income in terms of each ruble invested.

The efficiency ratio formula is as follows:

KE \u003d VP / W x 100%, where:

KE - coefficient of efficiency (profitability),

VP - gross profit,

Z - costs.

Let's go back to the example:

• for a hairdresser's EC = 60,000 / 200,000 x 100% = 30%;
• for repair services KE = 250,000 / 200,000 x 100% = 125%.
• The method shows that the effect of investing in a repair service far exceeds that of a hairdressing salon. It is logical that our Luchinkin will continue to develop the repair business and will not be scattered into another type of activity.

Efficiency Analysis

In any of the two considered commercial areas, analyzing the calculation relative indicator, it is possible to draw conclusions about measures to optimize activities based on mathematical logic. To achieve a greater economic effect from investments, you need to:

1. Increase profits without additional costs, for example:
2. 1. increase the competitiveness of products;
   2. find effective marketing techniques;
   3. motivate labor collective to the growth of labor productivity.
3. Reduce costs without reducing sales volumes, for example:
4. 1. modernization, automation of a part of the operational process;
   2. search for new suppliers with lower prices;
   3. reduction of inefficient workers.
5. Combine both options.

In addition to the main efficiency coefficient, additional profitability indicators. In general, profitability shows how much product needs to be sold in order to cover costs and break even, and serves as an indicator of the company's stability.

The efficiency threshold is determined for each company. It is generally accepted that the costs are less - the profit is higher and the business is more successful. Judgment works to a certain extent, but for strategic development a long-term analysis of economic efficiency is needed.