The article analyzes the problems of methodical support for the business activity analysis of various business subjects. The propositions concerning the improvement of the calculation technique and evaluation of the enterprises' business activity indices are carried out.
Keywords: business activity, performance, working capital, the criteria for effectiveness, turnover, resources
In a market economy, the stability of the financial condition of the enterprise is largely determined by the degree of its business activity. Business activity — one of the most important indicators for assessing the performance of the enterprise. It is manifests itself in the dynamics of its development, the attainment of goals that reflect the natural and value indicators in the effective use of economic potential, expanding sales markets, and the like. Levels of business activity of a particular organization reflect the stages of life — birth, growth, rise, decline, crisis, depression — shows the degree of adaptation to changing market conditions, the quality of management.
Business activity can be described as motivated macro — and microeconomic level of management of the process of sustainable economic activity, aimed at ensuring its positive dynamics, increasing of employment and effective use of resources to achieve market competitiveness. That is, business activity expresses the efficiency of using material, human, financial and other resources for all business lines, activities and characterizes the quality of governance, opportunities for economic growth and capital adequacy. The financial aspect is primarily manifested in the speed of turnover of its assets, reflects the performance of the company relative to the value advanced resources, or about the size of their consumption in the production process. [1]
The main criteria of business activity of the enterprise are:
‒ breadth of markets, including availability of deliveries for export;
‒ the reputation of the company;
‒ compliance plan the main indicators of economic activity of the enterprise;
‒ providing the specified growth rate;
‒ the level of efficiency of use of capital;
‒ the sustainability of economic growth and the like.
To evaluate business activity of the enterprise, it is advisable to use two analytical approaches:
1) the level of compliance of the key performance indicators of the enterprise: sales, net profit, increasing the base material; providing a specified rate of growth;
2) the level of efficiency of resources of the enterprise.
For the implementation of the first direction of analysis is necessary to compare the rate of change of the main indicators based on the evaluation of their dynamics. Optimal is a ratio called «Golden rule of enterprise economy»:
TPE > TR > TAK > 100%. (1)
where, TPE, T'or, TAK is the rate of change of the balance sheet profit, sales and total assets, respectively. [2]
Given the ratio of means:
‒ the company's profit growth exceeds compared to the volume of sales, indicating the relative cost savings;
‒ a higher rate of growth in sales compared to the assets of the company attest to the effectiveness of their use;
‒ the economic potential of the enterprise increased in comparison with the previous year.
Some deviations that violate this ratio, should not be regarded as negative if the company expands its activities and invests in the development of new technologies, processing, upgrading and reconstruction of production.
JSC «KazTransOil»: TPE=44527/44712*100 %=99.5 %
Top =207108/213162*100 %=97 %
TAK =744976/619262*100 %=120 %
The ratio of (1) in the context of the investigated company has the view:
tPE > top < TAK >100 %.
Every year the company increases its production, receiving high enough profits and occupies a strong place in the market.
To calculate the impact factors on resource use the method of chain substitutions. The method of chain substitutions is used to determine which factors influenced the analyzed indicator and from all the operating factors to identify the main ones that have a decisive influence on the change in the indicator. [3]
The essence of the method is that, by determining the effect of one factor, other factors should be assumed as unchanged. To do this, in the calculations consistently replace the private plan (basic) indicators reporting (actual). The obtained results are compared with the available previous data. The difference shows the size of the influence of this factor on the change in the aggregate index.
Profit before tax = Revenues — Costs — General and administrative expenses — Sales expenses — Impairment of fixed assets + Other profits + Financial income — Financial costs — Foreign exchange loss + — Share of profit / loss of joint ventures. For convenience, we change the indicators:
Y= a-b-c-d-e+f+g-h-k+-m (2)
We use the method of chain substitutions:
Y bases = 67 319 million. Tenge
Yfact = 54908 million tenge
ΔY — Yfact –Ybase
The method of chain substitutions
|
Indicators |
Formula |
Sum |
|||
|
Revenues |
∆Ya |
Ya-Yбаза |
61267 |
67321 |
-6054 |
|
Cost of sales |
∆Yb |
Yb-Ya |
55469 |
61267 |
-5798 |
|
General and administrative expenses |
∆Yc |
Yc-Yb |
51908 |
55469 |
-3561 |
|
Other operating expenses |
∆Yd |
Yd-Yc |
52773 |
51908 |
865 |
|
Impairment of property, plant and equipment, net |
∆Ye |
Ye-Yd |
39891 |
52773 |
-12882 |
|
Other operating income |
∆Yf |
Yf-Ye |
42171 |
39891 |
2280 |
|
Financial income |
∆Yg |
Yg-Yf |
45335 |
42171 |
3164 |
|
Financial expenses |
∆Yh |
Yh-Yg |
45053 |
45335 |
-282 |
|
(Loss) / foreign exchange gain, net |
∆Yk |
Yk-Yh |
17898 |
45053 |
-27155 |
|
Share of profit / (loss) of jointly controlled entities |
∆Ym |
Ym-Yk |
54908 |
17898 |
37010 |
|
TOTAL (increase / decrease in profit before tax) |
-12413 |
||||
|
Note: compiled by the author |
|||||
Analysis of business activity allows you to identify opportunities to use the enterprise's funds more effectively and develop measures that can help reduce the cost of production and sales of products at the expense of the economy of working capital and accelerate their turnover.
When evaluating business activity, special attention is usually drawn to the turnover of receivables and payables, since these quantities are largely interrelated. But a decrease in turnover can mean both problems with paying bills, and more effective organization of relationships with suppliers, providing a more profitable, deferred payment schedule and using payables as a source of cheap financial resources. Nevertheless, the basic approach to the evaluation of turnover is the following: the shorter the turnover period, the more effective is the commercial activity of the enterprise and the higher its business activity. [4]
In the production activity in the analysis of the enterprise great attention is paid to assessing the intensity of use of circulating assets (current assets), since the speed of turning them into cash depends on the liquidity of the company and its chances of success. The rate of turnover of working capital is characterized by the following indicators.
Sustainable financial condition as a consequence of economic growth, contributes to the development of enterprises, and the unstable condition implies the possibility of bankruptcy. Therefore, one important task of the enterprise is to ensure the sustainable growth of its economic development. In the expert-analytical practice enterprise capabilities to expand the core activities is determined using the coefficient of stability of growth (ToMS):
ToCP= (FC— D)/VKH 100% = Pro/WSS 100% (3)
where HR — the net profit of the enterprise; D — dividends paid by the shareholders; Pre — the profit directed on development of the enterprise; VC — equity. [5]
In determining the trend of the turnover funds of the enterprise, in addition to changing the overall turnover, examine the ratio of speakers of non-current and current assets, as well as using indicators of mobility of all assets of the company and working capital.
Factor mobility means the company determine the ratio of the value of current assets to the value of all funds.
The coefficient of mobility of the working capital of the enterprise is determined by dividing the most mobile part (money and financial investments) to the cost of working capital. [6]
The increase of the coefficients of mobility of these funds and circulating assets shows the tendency of acceleration of the turnover funds of the enterprise. Low mobility of current assets does not always mean a negative trend. High profitability of production and products enable the company to purposefully allocate the funds available to expand production. [7]
Analysis of all these indicators should be conducted in dynamics, to calculate and determine the rate of change of these indicators.
References:
- John Wiley and Sons Inc. Statistical Analysis and Data Mining Scopus coverage years: from 2008 to 2016Publisher:John Wiley and Sons Inc.ISSN:1932–1872
- Tusi Mathematical Research Group Annals of Functional Analysis E-ISSN:2008–8752
- Mintzberg H. Five Ps for Strategy, California Management Review, in The Strategy Process, Prentice Hall, Englewood Cliffs, NJ, 1987.
- Financial statement of «KazTransOil» JSC www.kaztransoil.kz
- http://accountingexplained.com
- Wiley-Blackwell Accounting and Finance ISSN:0810–5391
- Хотинская, Амбросьев «Методический инструментарий деловой активности» 2010 г.
