There is no general indicator that would cover all aspects of an enterprise’s production activities and indicate how effective they are.
The performance indicators of an japan phone number enterprise include an assessment of the profitability of the organization and its assets, a study of the rate of asset turnover, growth in labor productivity, and the efficiency of using the organization’s resources and available equipment.
In other words, to evaluate the performance indicators of the enterprise, you need to calculate certain financial ratios and then conduct a comprehensive analysis of the obtained values. This way, you will be able to see the full picture of how effectively the enterprise operates as a whole.
Efficiency can be determined by the general formula:
Ef = Production results / Production costs
But in practice, this formula is inconvenient to apply, since it can be difficult to evaluate both the results and all production costs in quantitative terms. For example, the results of work can only be analyzed from a qualitative perspective, and therefore it is difficult to reduce everything to a common single result in this case.
The Importance of Assessing Enterprise Performance Indicators
When economists are engaged in summing up the annual results of the enterprise, they evaluate the deviation of actual data from planned indicators, track the dynamics of changes over several years, analyze financial ratios. At the same time, the issue of the company's efficiency in the process of obtaining final indicators for the year of work is often given little attention.
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It may seem strange, but the presence of large sums of money in the organization's accounts does not mean that the business is developing and generating good income. The same can be said about the other side - if at the moment there is a cash gap and there is a shortage of funds, this does not mean that the company is in crisis or is bankrupt.
From a financial and economic point of view, the efficiency of an organization is determined not only by its current material condition, but also by its entire economic structure as a whole, taking into account potential income and expenses.
The Importance of Assessing Enterprise Performance Indicators
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Different methods and calculation formulas are used to evaluate the results. Some of them are aimed at a comprehensive assessment, while others determine the profitability of a specific indicator. There are also methods that examine the productivity of employees. For example, the amount of sales of products for the previous month is a general evaluation criterion, and the number of transactions carried out personally by one of the sales managers is a specific indicator.
In practice, it can be quite difficult to correctly define KPIs, despite the fact that this approach has been used for a long time and very widely. If management makes a mistake in choosing indicators for assessing the effectiveness of the enterprise, or chooses incorrect methods for determining them, this can lead to an incorrect strategy for further development and the risk of financial collapse of the company.
For example, let's consider profit as an indicator of the efficiency of the enterprise. Its planned annual size can be obtained if additional discounts for clients are used. On the one hand, this will lead to an increase in product sales, but at the same time, commercial costs and logistics expenses will increase.
As a result, the profitability of the business will decrease significantly. This will automatically lead to a decrease in the company's competitiveness in the market, as a result of which the enterprise will most likely lose a certain market share next year.
The owners of the organization may consider such a decrease in profitability as their lost profit and make claims on this matter to the company's management. Therefore, it is necessary to evaluate the efficiency of the enterprise, summing up the annual results, and in case of its decrease, identify the reasons.