The indicator of capital productivity shows the volume of the wholegross or commodity position in relation to the price of the company's fixed assets. Even in the Soviet Union, it was considered a testament to the effectiveness of the work of an organization. And here there is nothing to be surprised, as the return on assets shows how much the goods (products) the given enterprise produces per unit of the price of fixed assets invested in it.
By its importance, it can be compared withdepreciation of fixed assets or with profitability (an indicator of efficiency) of products, since it is on the basis of the value of the return on assets that we can conclude how well an enterprise works. To do this, in the role of checking figures, as a rule, a comparison is used between the volume of products already released to the market and the price of fixed assets that were involved in the process of manufacturing the goods. After that, determine the amount of net profit, which is then compared with the deductions of depreciation. In the event that depreciation is lower than the income received, it means that the company's work can be called successful and effective.
This indicator also helps entrepreneursto make decisions when acquiring new equipment. If the income from its use exceeds the spending on the purchase, then we can assume that the businessman or the company has effectively invested money in the business. The means of insurance - this is the return on assets. Its formula should be known to any businessman. Next, we will learn how to calculate this important indicator.
How is the return on assets calculated? Calculation formula
There are several formulas. The main looks like this:
Capital productivity = output / initial price fixed assets.
You may have a natural question about how,why in this formula is displayed exactly the initial price of fixed assets? This can be explained by the fact that the value is determined for the released goods in relation to the funds that are invested in it. It is worth noting that the authors have not yet reached a consensus on how to determine this formula of this indicator. Therefore, there is such a formula for capital productivity:
Capital productivity = output for the year / average annual price of fixed assets,
and
Capital productivity = commodity / ((fixed assets at the end of the period + fixed assets at the beginning of the period) / 2).
What factors influence the result in the calculation of capital productivity?
In addition to the cost of fixed assets and depreciation on the result, the return on capital is affected to some extent by the following factors:
- change in the number of equipment or major repairs;
- change in the ratio of fixed assets of non-production and production value;
- change in the volume of the produced goods due to market or other factors;
- Change in the production load due to changes in the nomenclature of the goods for release.
However, one should know that the return on capital does not take into account some other factors. At this stage it is necessary to determine:
- changing the order and structure of fixed assets intended for production;
- change in equipment and equipment downtime;
- change in equipment efficiency.
Capital productivity: the formula for improving efficiency
How to improve the return on assets? This can be done in several ways:
- increase in the number of basic equipment, which will entail a change in the order and structure of fixed assets;
- the sale of equipment that is rarely used or not used at all in the process of work;
- elimination of downtime at the firm;
- production of products that have a higher value added value;
- increase production efficiency, which is achieved by increasing productivity and other ways.
We can say that there is an inextricable linkbetween concepts such as "productivity" and "capital productivity." The formula, which was given in this article, can be useful to every entrepreneur and businessman.
