Theme: Theme: Socio-economic Socio-economic indicators characterizing indicators characterizing

activity of firm activity of firm PlanPlan:: Absolute indicators of efficiency. Absolute indicators of efficiency. Relative indicatorsRelative indicators of efficiencyof efficiency.. Indicators of economic potential of Indicators of economic potential of

firmfirm..

An An economic indicatoreconomic indicator is a  is a statisticstatistic about an  about an economic activityeconomic activity. Economic . Economic indicators allow analysis of economic indicators allow analysis of economic performance and performance and predictionspredictions of future  of future performance. One application of performance. One application of economic indicators is the study of economic indicators is the study of business cyclesbusiness cycles. Economic indicators . Economic indicators include various indices(include various indices(индексыиндексы), ), earnings reports, and economic earnings reports, and economic summaries. summaries.

Indicators characterizing activity of firm Indicators characterizing activity of firm divided in to absolute and relative.divided in to absolute and relative.

Absolute data Absolute data characterise scale(characterise scale(масштабымасштабы) ) of operations of firm, its capacity, results of of operations of firm, its capacity, results of industrial and marketing activity, etc. They industrial and marketing activity, etc. They contain in the operative and financial contain in the operative and financial reporting of firm. Sales volumes, balance reporting of firm. Sales volumes, balance results, profit and other indicators are results, profit and other indicators are absolute dataabsolute data..

Relative data are Relative data are the factor, the showing ratio the factor, the showing ratio received by absolute indicators.received by absolute indicators.

Groups of absolute and relative Groups of absolute and relative indicators characterize:indicators characterize:

• • economic potential of firm;economic potential of firm; • • efficiency activity of firm;efficiency activity of firm; • • competitiveness;competitiveness; • • financial position of firm.financial position of firm.

Indicators of economic potential Indicators of economic potential of firm: of firm: assets, sales volume , net assets, sales volume , net and total profit, fixed capital, a and total profit, fixed capital, a working capital, investments, own working capital, investments, own and extra capital, capacities, and extra capital, capacities, general number of the employeesgeneral number of the employees . .

IIn n economicseconomics an asset is any form in  an asset is any form in which which wealthwealth can be held. can be held.

AAssets represent value of ssets represent value of ownershipownership that can be converted into  that can be converted into cashcash (although cash itself is also  (although cash itself is also considered an asset).considered an asset).

Two major asset classes Two major asset classes areare

  

tangible assetstangible assets ((материальные активыматериальные активы))   intangible assetsintangible assets (н(нематериальные активыематериальные активы))

tangible assets intangible assets

Tangible assets are those that have a Tangible assets are those that have a physical substance, such as physical substance, such as currenciescurrencies, , buildingsbuildings, , real real

estateestate, , vehiclesvehicles, , inventoriesinventories, , equipmentequipment, and , and precious metalsprecious metals

real estatereal estate-- недвижимое имуществонедвижимое имущество

VehiclesVehicles--транспортные средстватранспортные средства

inventoriesinventories --материальные запасы материальные запасы

Intangible assetsIntangible assets are are nonphysical nonphysical resourcesresources and rights that have a and rights that have a value to the firm because they give value to the firm because they give the firm some kind of advantage in the firm some kind of advantage in the market place. Examples of the market place. Examples of intangibleintangible assets are  assets are  copyrightscopyrights(авторские права)(авторские права), , trademarkstrademarks (торговые (торговые

марки)марки),,  patentspatents(патенты)(патенты) and  and computer programscomputer programs. .

Fixed assetsFixed assets, also known as "tangible , also known as "tangible assets" assets"   or  or property, plant, and property, plant, and equipmentequipment  is a term used in   is a term used in accountingaccounting for  for assetsassets and  and propertyproperty that cannot easily be converted into  that cannot easily be converted into cashcash. This can be compared with . This can be compared with current assetscurrent assets such as cash or bank  such as cash or bank accounts, which are described as accounts, which are described as liquid assetsliquid assets. .

fixed assets normally include items fixed assets normally include items such as such as landland and  and buildingsbuildings, , motor vehiclesmotor vehicles, , furniturefurniture, , office equipmentoffice equipment, , computerscomputers, , fixtures and fittings, plant and fixtures and fittings, plant and machinerymachinery. .

fixtures and fittings-крепления и fixtures and fittings-крепления и настройкинастройки

Fixed assets to equity ratioFixed assets to equity ratio measures  measures the contribution of stockholders and the the contribution of stockholders and the contribution of debt sources in the fixed contribution of debt sources in the fixed assets of the company. It is computed assets of the company. It is computed by dividing the fixed assets by the by dividing the fixed assets by the stockholders’ equity.stockholders’ equity.

Other names of this ratio are Other names of this ratio are fixed fixed assets to net worth ratioassets to net worth ratio and  and fixed fixed assets to proprietors fund ratioassets to proprietors fund ratio..

If fixed assets to stockholders’ equity ratio is more If fixed assets to stockholders’ equity ratio is more than 1, it means that stockholders’ equity is less than than 1, it means that stockholders’ equity is less than the fixed assets and the company is using debts to the fixed assets and the company is using debts to finance a portion of fixed assets. If the ratio is less finance a portion of fixed assets. If the ratio is less than 1, it means that stockholders’ equity is more than 1, it means that stockholders’ equity is more than the fixed assets and  the stockholders’ equity than the fixed assets and  the stockholders’ equity is financing not only the fixed assets but also a part is financing not only the fixed assets but also a part of the working capital.of the working capital.

Different industries have different norms. Generally Different industries have different norms. Generally a ratio of 0.60 to 0.70 (or 60% to 70%, if expressed in a ratio of 0.60 to 0.70 (or 60% to 70%, if expressed in percentage) is considered satisfactory for most of the percentage) is considered satisfactory for most of the industrial undertakings.industrial undertakings.

Fixed assets to stockholders’ equity ratio is used as a Fixed assets to stockholders’ equity ratio is used as a complementary ratio to proprietary ratio.complementary ratio to proprietary ratio.

Working capital is the money needed Working capital is the money needed to fund the normal, day to day to fund the normal, day to day operations of your business. It operations of your business. It ensures you have enough cash to ensures you have enough cash to pay your debts and expenses as they pay your debts and expenses as they fall due, particularly during your fall due, particularly during your start-up period.start-up period.

Current assets - It is rightly Current assets - It is rightly observed that “Current observed that “Current assets have assets have a short life span. These type of a short life span. These type of assets are engaged assets are engaged in current in current operation of a business and normally operation of a business and normally used for short- term operations of used for short- term operations of the firm during an accounting period the firm during an accounting period i.e. within twelve months. i.e. within twelve months.

Production cycleProduction cycle

Production cycle– The time taken to Production cycle– The time taken to convert raw material convert raw material into finished into finished products is referred to as the production products is referred to as the production cycle or cycle or operating cycle. The longer the operating cycle. The longer the duration of production cycle, the greater duration of production cycle, the greater is the requirement of working capital. is the requirement of working capital. Utmost care should be taken to shorten Utmost care should be taken to shorten the period of the production cycle in the period of the production cycle in order to minimize working capital order to minimize working capital requirements. requirements.

The working capital ratio, also called The working capital ratio, also called the current ratio, is a liquidity ratio that the current ratio, is a liquidity ratio that measures a firm's ability to pay off its current measures a firm's ability to pay off its current liabilities with current assets. The working liabilities with current assets. The working capital ratio is important to creditors because capital ratio is important to creditors because it shows the liquidity of the company.it shows the liquidity of the company.

Current liabilities are best paid with current Current liabilities are best paid with current assets like cash, cash equivalents, and assets like cash, cash equivalents, and marketable securitiesmarketable securities((рыночные ценные бумаги рыночные ценные бумаги )) because these assets can be converted into because these assets can be converted into cash much quicker than fixed assets. cash much quicker than fixed assets.

A ratio less than 1 is considered risky by A ratio less than 1 is considered risky by creditors and investors because it shows the creditors and investors because it shows the company isn't running efficiently and can't company isn't running efficiently and can't cover its current debt properly. A ratio less cover its current debt properly. A ratio less than 1 is always a bad thing and is often than 1 is always a bad thing and is often referred to as negative working capital.referred to as negative working capital.

On the other hand, a ratio above 1 shows On the other hand, a ratio above 1 shows outsiders that the company can pay all of its outsiders that the company can pay all of its current liabilities and still have current current liabilities and still have current assets left over or positive working capital.assets left over or positive working capital.

ССapacity is often defined as the capability of an apacity is often defined as the capability of an object, whether that is a machine, work center object, whether that is a machine, work center or operator, to produce output for a specific or operator, to produce output for a specific time period, which can be an hour, a day, etc. time period, which can be an hour, a day, etc. Many companies ignore the measurement of Many companies ignore the measurement of capacity, assuming that their facility has capacity, assuming that their facility has enough capacity, but that is often not the case. enough capacity, but that is often not the case. Increasingly software programs like enterprise Increasingly software programs like enterprise resource planning (ERP) and warehouse resource planning (ERP) and warehouse management systems (WMS) calculate management systems (WMS) calculate throughput based using formulas that are throughput based using formulas that are dependant on capacity.dependant on capacity.