(efficiency of non-working capital) - a coefficient equal to the ratio of the cost of manufactured or sold products after deducting VAT and excise taxes to the average annual cost of fixed assets.
It is calculated in the FinEkAnalysis program in the Business Activity Analysis block as Return on Capital.
Shows what is the return on each ruble invested in fixed assets, what is the result of this investment.
General formula for calculating the coefficient:
Calculation formula based on the old balance sheet data:
| K f = | p.010 |
| 0.5*(line 120 n + line 120 k) |
where line 010 is the line of the profit and loss statement (form No. 2), line 120 n and line 120 k are the lines of the balance sheet (form No. 1) at the beginning and end of the reporting period.
Calculation formula based on the new balance sheet:
Capital productivity is an indicator reflecting the level and effect of operation of fixed assets. The value of the indicator depends on industry characteristics, the level of inflation and revaluation of fixed assets.
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(efficiency of non-working capital) - a coefficient equal to the ratio of the cost of manufactured or sold products after deducting VAT and excise taxes to the average annual cost of fixed assets.
It is calculated in the FinEkAnalysis program in the Business Activity Analysis block as Return on Capital.
Shows what is the return on each ruble invested in fixed assets, what is the result of this investment.
General formula for calculating the coefficient:
Calculation formula based on the old balance sheet data:
| K f = | p.010 |
| 0.5*(line 120 n + line 120 k) |
where line 010 is the line of the profit and loss statement (form No. 2), line 120 n and line 120 k are the lines of the balance sheet (form No. 1) at the beginning and end of the reporting period.
Calculation formula based on the new balance sheet:
Capital productivity is an indicator reflecting the level and effect of operation of fixed assets. The value of the indicator depends on industry characteristics, the level of inflation and revaluation of fixed assets.
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“Good organization with poor equipment will produce better results than excellent equipment with poor organization,” said the American engineer and founder of the scientific organization of labor F.W. Taylor. And he was right: the efficiency of using fixed assets is more important than their quantity and brand. In domestic analysis practice, for the efficiency of using non-current assets, the capital productivity indicator is primarily used. What does the formula for return on fixed assets actually look like? What secrets does this analytical indicator hide? How to interpret it correctly?
Capital productivity is a relative value (ratio) showing how many monetary units of income fall on each monetary unit invested in production fixed assets.
Capital productivity = Product cost / Average cost of fixed assets
This seemingly simple indicator is not universal due to different approaches to its calculation. Let's consider the main options for filling the components of the formula.
Product cost is the cost of the enterprise's products for a certain period. But here you can use the following options:
Average cost of fixed assets is a calculated indicator that takes into account the availability of assets at the beginning and end of the analyzed period.
OF medium = (OF start + OF end) / 2
But the value of PF environments will depend on the cost at which fixed assets will be taken for calculation. The following options are possible here:
Domestic enterprises do not show the market value of non-current assets in their financial statements and do not take into account inflation. But the earlier the objects were purchased (built), the cheaper they are. And as a result, the higher the capital productivity will be. And you shouldn’t rejoice at such “success”.
In foreign practice, the term “capital productivity” is not used. But there is a fixed asset turnover ratio (Fixed Assets Turnover Ratio), which characterizes the payback of non-current assets. The calculation formula for the fixed asset turnover ratio is as follows:
FATR= Net sales revenue / Net (less depreciation) cost of fixed assets
It shows how many times during the analyzed period income from product sales without indirect taxes pays off financial investments in fixed assets.
The capital productivity indicator depends on which objects will be taken into account during the calculation: all fixed assets or only production ones. It is preferable to take into account only production ones, since they are directly involved in the creation of products that must pay for them.
But it is impossible to identify production assets in the balance sheet of an enterprise, so financial analysts use generalized figures, which negatively affects the “purity of the experiment.”
There are no standards for this indicator. Judging capital productivity will always be highly subjective. Its analytical value in itself is very conditional, not only because this coefficient is calculated in different ways, but also because of its dependence on the duration of the analyzed period. Capital productivity for a quarter or half a year (other things being equal) will always be less than capital productivity for the year.
Remember: The longer the analyzed period, the higher the capital productivity ratio.
This is due to the fact that the cost of production is taken into account over an interval (the longer the interval, the more products will be produced/sold), and the cost of fixed assets is the average of momentary values for a specific date.
To assess capital productivity it is necessary:
To increase the capital productivity of fixed assets, a whole range of measures is required.
The first aspect is related to the company's products:
The second aspect is related to the use of fixed assets:
Increasing capital productivity is not an end in itself. For an analyst, it is much more important to determine what factors influenced this indicator and develop an optimal policy for managing fixed assets of a particular company in a particular industry.
One of the main general indicators characterizing the level of efficiency in the use of fixed production assets is capital productivity.
Capital productivity is an indicator of the efficiency of use of fixed assets, calculated as the annual output divided by the cost of fixed assets with which these products were produced; in its most general form, capital productivity characterizes the level of use of fixed assets (assets).
Capital productivity is defined as the ratio of output (gross, marketable, net) to the average annual cost of fixed assets. The capital productivity indicator is used when analyzing the level of use of fixed assets, planned justification of production volumes and the increase in new capacities.
where VP is output, thousand rubles.
Fsr - average annual cost of fixed production assets, thousand rubles.
Capital productivity shows how many products in value terms are produced in a given period per 1 ruble of the cost of fixed production assets. The better the fixed assets are used, the higher the return on assets.
The level and dynamics of capital productivity in an enterprise are influenced by:
Volume of production in physical terms and product price;
Composition and structure of fixed assets (in particular, age structure, share of the active part of fixed assets);
Productivity, price and other technical and economic indicators of machinery and equipment; level of depreciation of elements of fixed assets;
The share of unused elements of fixed assets; degree of loading of machinery and equipment; coefficients of utilization of production area and production capacity of the enterprise.
Capital intensity is an indicator inverse to capital productivity; characterizes the cost of production fixed assets per 1 ruble. products.
The capital intensity of products is used to determine the need for fixed assets when developing long-term plans, choosing effective options for technical development, and to study the economic efficiency of existing production.
Depending on the participation of fixed assets in production, capital intensity is divided into direct, indirect and full.
Straight- takes into account the cost of fixed assets of a particular enterprise.
Indirect- includes only the value of fixed assets that operate at other enterprises and indirectly participate in the creation of component products for this enterprise.
Full- the total value of direct and indirect capital intensity.
production economic resource material
They also highlight incremental capital intensity indicator. It is calculated as the ratio of the increase in fixed assets to the increase in production over a certain period of time (month, quarter, year). Incremental capital intensity is usually used to establish the reasons that influenced the level of capital intensity in the analyzed year.
Using capital intensity indicators, it is possible to trace the dynamics of the level of use of fixed assets, identify connections between productivity and capital-labor ratio, and evaluate the effectiveness of forms of intensive expanded reproduction.
Capital-labor ratio is an indicator characterizing the equipment of workers of enterprises in the sphere of material production with basic production means. Capital-labor ratio is defined as the ratio of the cost of fixed assets of an enterprise to the average annual number of employees.
where H is the average number of employees.
There is a relationship between capital productivity and labor productivity and capital-labor ratio:
where Фo is capital productivity, rub.;
VP - production volume, thousand rubles;
Fsr - average annual cost of fixed assets, thousand rubles;
N - average number of employees, people.
PT - labor productivity, thousand rubles;
Fv - capital-labor ratio, thousand rubles.
To increase capital productivity, it is necessary that the growth rate of labor productivity outpace the growth rate of its capital-labor ratio.
Along with the above indicators, when analyzing the economic efficiency of using fixed production assets, the profitability of fixed production assets is calculated:
where P is the annual amount of profit, thousand rubles;
Fsr - average annual cost of fixed assets, thousand rubles.
The profitability indicator of fixed production assets depends on the structure of fixed assets, their size and use, the range of manufactured products, prices for finished products and raw materials.
Any production strives for more productive and efficient work through the use of its assets, which can increase the company’s profit several times.
Capital productivity is one of the important indicators that helps to calculate whether a company is performing its production activities correctly. In other words, capital productivity serves as the main criterion for a company's performance.
Capital productivity is a criterion that can reflect the degree of efficiency in the use of fixed assets. This ratio shows how profit relates to one unit of price size for fixed assets.
If you use only the capital productivity indicator, in the future it will be impossible to make a conclusion about the effectiveness of the money capital used. This criterion can clearly show how the income received and the price of assets used by production relate to each other.
In order to correctly determine the efficiency of main production assets, it is necessary to conduct an analysis of capital productivity, which has been obtained over the past few years and compare them with current readings.
The criterion for this indicator does not have a generally accepted meaning. This is due to the fact that it is highly dependent on the industrial sector. All this can be seen in the example of capital-intensive companies, where the bulk of their cash assets are large, which means that the indicator will be at the lower limit. If the coefficient is actively increasing, it means that the company is using its equipment at peak efficiency.
In order to properly increase the capital productivity indicator, it is necessary to increase the company's profit or get rid of unnecessary machines that do not generate income for the company. This way you can reduce the cost in terms of the coefficient.
Like any other indicator that shows the efficient operation of production, capital productivity is relative. It can reflect the dependence of the income received on the value of the underlying stock investments.
In order to make calculations, you need to find the ratio of income received to funds received from the sale of fixed assets or to the active share of funds.
The main benefits and price of funds are most often measured in rubles. Therefore, capital productivity is measured as rub/rub. In most cases, after all calculations, the result is multiplied by 100%, and then the result will be measured as a percentage.
Experts use this formula:
Capital productivity = profit received / amount of fixed assets
If the enterprise requires a more accurate result, for this it is necessary to replace the denominator with the average criterion for the price of fixed assets taken over a certain period of time. To find it out, you need to add the totals for the initial and final calculation periods and divide the result by two.
Some experts are of the opinion that calculations should be made taking into account the very first cost of capital. But in many cases the final price is used because it is reflected in the accountant's report.
The capital productivity indicator is typical for turnover in production. But, unfortunately, it is not able to provide complete information about how much assets and liabilities are used.
There are also other indicators:
They are also calculated by dividing the total cost of profit by the amount of liabilities or various assets.
This indicator reflects the amount of fixed assets, which is calculated per ruble of goods produced. The lower this coefficient is, the more efficient production is. Also, a decrease in capital intensity over a certain period of time has a positive effect on the development of the company.
If during calculations this indicator increases and capital productivity decreases, it follows that the enterprise is operating irrationally, not having a full workload.
For all types of industries of any production there is its own indicator. Experts recommend conducting analysis only for similar production.
To make calculations to determine capital intensity, you need to:
Cost of average annual funds taken for the initial period of the year / proceeds.
