Fondootdacha shows the efficiency of production at all levels of the economy

The fixed assets are of great importance for the effective functioning of the enterprise. Improving the quality of their use can solve many problems related to production. And they affect both a single company, and the industry and, ultimately, the economy of the whole country. Effective use of fixed assets allows you to increase the volume of manufactured products, reduce the cost of production, increasing labor productivity. And this directly affects the increase in profitability of capital, profitability and, in the end, on the growth of the standard of living of society as a whole. To achieve these goals, it is important to regularly analyze the extent to which the enterprise uses fixed capital, applying various generalizing coefficients for this. One of the most important in this case is the return on assets. It shows the level of turnover of fixed assets and allows you to determine how effectively they are used in production. It is about this indicator that we will talk in the article.

Capital productivity: definition and meaning

As already mentioned, this coefficient characterizes the level of use of available capital at the enterprise, in the industry and the economy as a whole. It is determined on the basis of two quantities-the output of commodity or gross output and the value of fixed assets of production.

Capital productivity shows how much production falls on a unit of fixed assets, and depending on this, the degree of their use or efficiency is determined. And the value of the produced goods can have both a natural and a monetary expression (volume or value). And the indicator of capital productivity can be calculated for all funds, and only for their part.

Calculation of capital productivity: formula

At different levels of the economy can be calculated rate of return on assets. It shows the same thing at the same time, namely, the efficiency of production with respect to the use of capital, but on different scales. At the enterprise level, the annual volume of output produced by this coefficient is calculated. At the sectoral level, gross value added or gross output is used, and on the scale of the country's economy, the value of the gross domestic product.

Capital productivity of fixed assets shows the volume or value of this product, attributable to their unit (ruble). The coefficient is calculated by the following formula:

Product release / value of fixed assets.

Typically, the average annual cost of capital is taken , but a number of authors are inclined to a different opinion on this indicator. So, often the formula uses the cost of acquiring these funds (primary) or a value determined in this way:

(Funds at the beginning of the period + funds at the end of the period) / 2.

In any case, the sense of calculation does not change from this. Capital productivity shows the ratio of output to the funds invested in it.

Capital productivity and capital ratio

The reverse factor considered by us is the coefficient of capital intensity. You can say that these are the two sides of the coin. What shows the capital productivity and capital ratio to the owner of the enterprise? If the first speaks about the degree of application of fixed assets, then the second - about the need for them. The capital intensity illustrates the value of fixed assets attributable to the ruble of the product produced. It is determined by the formula:

1 / capital productivity or cost of fixed assets / output.

Having calculated this coefficient, the owner of the enterprise receives information on how much financial resources need to be invested in fixed assets in order to obtain the required volume of production. If the capital intensity decreases, this indicates a saving in labor.

Both indicators characterize the efficiency of the use of operating capital. If it rises, then the capital productivity grows, and the capital intensity, on the contrary, decreases. Is this a favorable trend? And every enterprise, one way or another, aspires to it.

Factors affecting the return on assets

The return on assets shows how well the enterprise functions. This is influenced by many very diverse causes, including those that are outside the production process. Let's see what contributes to the increase in capital productivity:

• Technical re-equipment, modernization and reconstruction;
• Better use of capacities and time of work;
• Reduction in the cost of a unit of capacity in the enterprise;
• Change in the structure of funds (an increase in the ratio between productive and non-productive means);
• Better development of working capacities;
• Market and other factors.

In addition, the quality of products should be taken into account. With other unchanging conditions, it also contributes to a more efficient use of capital, an increase in capital productivity and, consequently, profitability.

Conclusion

For effective work at each enterprise, such factors as capital ratio and return on assets should be regularly calculated and analyzed. This analysis shows a lot, because it allows you to assess the extent to which the enterprise uses its fixed assets and determine the need for them to achieve certain production goals.