Here are some of the economic indicators of companies most used to analyze financial performance, how they are calculated, what their components are and what they teach in terms of management.
Economic indicators of companies
General Income by the Producer or Manufacturer
It is the result of the sale of goods and services in a market.
The formula for its determination is:
Where:
IT = total income
Qv = quantity sold
P = sale price
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Operational and Economic Equilibrium Point
It refers to the minimum amount that must be produced in order not to win or lose. In other words, the income from the sale of the production at the market price is equal to the costs generated by its production or generation if it is a resale company.
The calculation formula is as follows:
Where:
Pe = operating break-even point
CF = fixed cost of the company
Pv = sale price of the product
CVu = Unit variable cost
CVu = CT / Q, that is, the total cost (CT) between the quantity produced or sold (Q)
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Benefits Obtained
(According to the value of money in time applying inflation and production time)
The benefits are the result of comparing the income with the costs of the company. These are obtained by subtracting the total costs from the company's income.
The formula is:
Where:
B = benefits obtained in the period
IT = total revenue = Qv * p = quantity sold (Qv) per price (p)
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Value of money over time
The Time value of money explains that money loses value as time passes. This can be measured by the Present Value (VP) and the Future Value (FV).
Present value
It involves assessing in the present the perspective of costs or income that is expected to be received in the future. It is done taking into account time and the discount rate (i) and time (n).
The flow of money refers to income or costs (flow), between (1 + i) n where the i refers to the discount or capitalization rate that is used, which can be the inflation rate when using own money, or the interest rate charged by the financial institution when the business receives financing.
Future Value
It is related to the valuation of a present flow (income or costs) in future time, taking into account the capitalization rate (i) and the time in which it is done (n).
The future value is determined using the following formula:
VF = future value, i is the capitalization rate, which can be the inflation rate or the financing payment rate, if applicable.
Relationship Benefits Costs
The Benefit - Costs relationship is an index that seeks to establish how much each peso generates in benefits for the company in both fixed and variable costs.
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Producer Profitability
Economic profitability measures the efficiency of a company in the use of resources (assets) it has at a given time.
Rodríguez (sf) states that profitability aims to:
The objective of economic profitability focuses on evaluating the performance of the total assets managed by the company's management, regardless of the financing method used, that is, without considering who has contributed the resources (owners or creditors). Broadly speaking, the higher the ratio, the more efficient the management performed by managers will be considered (p.1).
Profitability of Sales
This indicator measures the efficiency in production and distribution that a company can obtain when carrying out economic activities (Buenosnegocios.com, 2014)
This is calculated by dividing the profits obtained in the period by the company's sales for the period, multiplying this by 100, which allows it to be expressed in percent (%).
Formula:
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Bibliography
- Buenosnegocios.com. (May 15, 2014). Ratios: profitability over sales. Retrieved March 25, 2020, from https://www.buenosnegocios.com/notas/contabilidad-y-finanzas/ratiosr entabilidad-ventas-n747Rodriguez, L. (sf). ECONOMIC PROFITABILITY. Retrieved March 25, 2020, from
