capital productivity index shows the amount of the gross or heading towards the cost of fixed assets of the company.Even in the Soviet Union, he was considered evidence of the efficiency of any organization.And there is nothing surprising, since the return on assets ratio shows how many goods (products) produces the enterprise unit price of the underlying funds invested in it.
In order of importance can be compared with the depreciation of fixed assets or profitability (performance indicator) production, as it is based on values of return on assets can be concluded about how well a particular company.For this purpose, as used in test numbers are usually comparing the amount of product already put on the market, and prices of assets that were used during the manufacture of the product.Then determine the amount of net income, which is then compared with deductions for depreciation.In that case the suspension is lower than the revenue earned, so the work the company is the successful and effective.
Also, this indicator helps entrepreneurs make decisions when purchasing new equipment.If the income from its use exceeds the spending on the purchase, you can assume that a businessman or a company to effectively invest money into the business.Hedging tool - this is capital productivity.The formula it should be known to any businessman.Next we will learn how to calculate this important indicator.
How is the return on assets?The formula for calculating
There are several formulas.The main looks:
Assets ratio = products manufactured / the original price of fixed assets.
You may be a legitimate question of why in the formula is displayed starting price of fixed assets?This can be explained by the fact that the amount is determined for the released product in relation to the funds that are invested in it.It is worth noting that the authors still have not agreed how to define this formula of this indicator.Therefore, there is a formula return on assets:
Assets ratio = release of the goods for the year / average price of fixed assets,
and
Assets ratio = product / ((fixed assets at end of period + fixed assets at the beginning of the period) / 2).
What factors influence the result of the calculation of return on assets?
addition to the price of fixed assets and amortization on the result of the return on assets affected in one way or extent and the following factors:
- change in the amount of equipment and major repairs;
- change in the ratio of non-productive assets and production values;
- change in the volume of goods produced due to market or other factors;
- production load change because of changes in the nomenclature of goods for release.
However, be aware that capital productivity does not account for other factors.At this stage, it is necessary to determine:
- changing the order and structure of fixed assets intended for production;
- change idle equipment and machinery;
- change in the efficiency of the equipment.
Capital productivity: efficiency enhancement formula
How to improve return on assets?This can be done in several ways:
- increase in the number of basic equipment, which will also change the order and structure of fixed assets;
- sales of equipment, which is rarely used or not used at all in the process;
- eliminating downtime in the company;
- production, which has a higher value added value;
- improving the efficiency of production, which is achieved by increasing productivity and by other means.
can say that there is an inextricable link between such concepts as "productivity" and "capital productivity".The formula that has been shown in this article can be useful to every entrepreneur and businessman.
