Enterprises of regulatory issues profit performance in the management of financial resources are one of the first places.As a result, the volume of output and changes in the cost structure, the operating lever makes it possible to appreciate the economic benefits.
concept of leverage, or the operating lever is connected to the structure of production costs and, in particular, a certain ratio of semi-variable and semi-fixed costs.If we consider the cost structure in this aspect, it is possible to achieve much.First, by reducing certain costs when sales increase, namely physical, to solve such a problem, how to maximize profits, a lot easier.Second, the distribution of costs for semi-variable and constant makes it possible to talk about payback, and makes it possible to calculate how big a financial safety margin of the company in case of any complications or difficulties on the market of varying complexity.And finally, thirdly, it allows you to count the decisive sales fully cover all costs, but also provides the enterprise with no losses.
operating or manufacturing arm - is a kind of process by which manages the assets and liabilities of the enterprise.Leverage is aimed at increasing the size of the profits, that is, at the same time, the operating lever - is a factor, the smallest change which will necessarily lead to a substantial, significant changes in productive performance.
Manufacturing lever or operating leverage - it is a mechanism that is based on the optimization of variable and fixed costs, as well as managing the entire profit of the company.Knowing all the work of the operational lever, you can easily predict what will change in the company's profit, if the change proceeds, and also precisely determine the point at which the company will manage to break even work.
operating lever - another means of management accounting, used as a tool to control the profit impact of the policy instrument categories of costs to reflect the impact of changes in the increase in sales income.Thanks to him, there is a significant rise in sales volumes.
The three main components of the operating lever is: the price of its variable and fixed costs.All are to some extent related to the sales volume, changing them can have a significant impact on it.
prerequisite for the use of operating leverage is the use of marginal analysis and accurate cost management.
The analysis must be clearly and accurately represent the following aspects:
- firstly, a change in fixed costs required to change the location of the break-even point of the enterprise, but at the same time does not change the size of the so-called marginal income;
- secondly, any change in variable costs only for one unit changes the profit margins and the position of the breakeven point;
- Third, a parallel change in the variable and fixed costs, and even in the same direction, is bound to cause a strong change in the position of the breakeven point;
- fourth, the change in the price changes the location of the break-even point and profit margins.
manufacturing arm - is, at the same time, the indicator helps managers choose the most optimal strategy, which was later used in the management of enterprise profit and costs.
variation of the effect of the production depends on the lever changes the proportion of costs constant.After all, the lower the percentage of the share of constant costs in their total amount, the higher the rate of change of the profit in relation to the changes in the rhythms of a particular revenue.
In certain cases, the manifestation of the mechanism of production of leverage has a number of features:
- a manifestation of the positive effects of the manufacturing arm begins only after overcoming the break-even point now;
- leverage effect of the production is reduced gradually with the growth in sales and the complete removal of the breakeven point;
- there is also the opposite direction of the production mechanism of leverage;
- between profit and production enterprise has leveraged inverse relationship;
- manifestation of the effect of leverage can only be productive in a short period.
Understanding the structure and functioning of the mechanism of action of the operational lever allows you to specifically control the fixed and variable costs in order to increase the efficiency of a particular enterprise.This control means changing the values of the forces of leverage for different trends in market conditions, stages and phases of the life cycle of the firm.
In the case of an unfavorable conjuncture of the commodity market or the early stages of operation of the business, its policy should be aimed at the reduction of the maximum power operating leverage by savings on fixed costs.
If the current conjuncture of the market is favorable and suitable in all respects, and the presence of safety significantly, the implementation of cost-saving mode constant can be significantly weakened.During such periods, the company is able to expand the scope of their real investment to modernize the main production assets.
should be noted that the fixed costs amenable to rapid change to a lesser extent, so many companies that have a significant effect of operating leverage, lose flexibility in managing costs of the enterprise.With regard to the variable costs only, the basic rule or principle of the management of these costs is the implementation of a permanent, continuous savings, which ensures an increase in sales volumes.