They are of great importance for the effective functioning of the enterprise. Improving the quality of their use can solve many problems associated with production. Moreover, they affect both an individual company and the industry and, ultimately, the economy of the entire country. Effective use of fixed assets allows you to increase the volume of output, reduce production costs, increasing And this directly affects the increase in return on capital, profitability and, ultimately, the growth of the standard of living of society as a whole. To achieve these goals, it is important to regularly analyze the degree of utilization by the enterprise using various generalization factors. One of the most important in this case is capital productivity. It shows the level of turnover of fixed assets and allows you to determine how efficiently they are used in production. It is this indicator that we will talk about in the article.
Return on Capital: Definition and Meaning
As already mentioned, this coefficient characterizes the level of use of available capital in the enterprise, in the industry and in the economy as a whole. It is determined on the basis of two values - the issued commodity or the cost of fixed assets of production.
Capital productivity shows the volume of production per unit of fixed assets, and depending on this, the degree of their use or efficiency is determined. Moreover, the value of the goods produced can have both physical and monetary expression (volume or value). And the return on assets indicator itself can be calculated for all funds, and only for part of them.
Calculation of capital productivity: formula
At different levels of the economy, the capital productivity indicator can be calculated. At the same time, he shows the same thing, namely, the efficiency of production in relation to the use of capital, but on different scales. At the enterprise level, to calculate this coefficient, the annual volume of products produced is taken. At the sectoral level, gross or gross output is used, and at the scale of the country's economy, the value of gross domestic product is used.
The capital productivity of fixed assets shows the volume or cost of this product per unit (ruble). The coefficient is calculated using the following formula:
As a rule, the average annual cost of capital is taken, but a number of authors tend to have a different opinion regarding this indicator. Thus, the formula often 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 meaning of the calculation does not change. Capital productivity shows the ratio of products produced to the funds invested in them.
Capital productivity and capital intensity
The opposite of the indicator we considered is the capital intensity ratio. You could say these are two sides of the coin. What does capital productivity and capital intensity show the owner of an enterprise? If the first speaks about the degree of use of fixed assets, then the second speaks about the need for them. Capital intensity illustrates the amount of fixed assets per ruble of 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 about how much financial resources need to be invested in fixed assets in order to obtain the required volume of production. If capital intensity decreases, then this indicates labor savings.
Both indicators characterize the efficiency of using existing capital. If it increases, then capital productivity also increases, and capital intensity, on the contrary, decreases. Is this a good trend? and every enterprise, one way or another, strives for it.
Factors influencing capital productivity
Return on assets shows how successfully the enterprise operates. This is influenced by many different reasons, including those outside the production process. Let's look at what helps increase capital productivity:
- technical re-equipment, modernization and reconstruction;
- better use of capacity and operating time;
- reducing the cost per unit of power at the enterprise;
- change in the structure of funds (increase in the ratio between production and non-production assets);
- better utilization of working capacities;
- market and other factors.
In addition, improvements in product quality should also be taken into account. All other things being constant, it also contributes to more efficient use of capital, increased capital productivity and, consequently, profitability.
Conclusion
To operate effectively, each enterprise must regularly calculate and analyze ratios such as capital intensity and capital productivity. Such an analysis shows a lot, because it allows you to assess the extent to which an enterprise uses its fixed assets and determine the need for them to achieve certain production goals.
The influence of the structure of fixed production assets on capital productivity is due to the fact that different categories of fixed production assets are unequally actively involved in the production process. From here when calculating capital productivity from fixed production assets are allocated active part: working machines and equipment.
Purpose. Using the online service, an analysis of the impact on capital productivity of changes in the specific gravity of the active part and changes in the active part of fixed production assets is carried out.
Instructions. Enter the required data: production volume, average annual cost. Click Next. If it is necessary to carry out more detailed capital productivity analysis, then you need to use this service.
Return on assets online
It is also possible to determine capital productivity indices of variable and constant composition and the impact of structural changes, savings (overexpenditure) of fixed assets due to improvement (deterioration) of their use.
See also factor analysis of changes in production volume
Example. Production of products, availability and use of fixed capital
| Indicator | Plan | Fact | Changes | V % |
| 1. Volume of production | 145600 | 197000 | 51400 | 35.302 |
| 2. Average annual cost of OPF, million rubles, F | 87400 | 94350 | 6950 | 7.952 |
| 2a. incl. active part, million rubles, Fa | 12340 | 15780 | 3440 | 27.877 |
| 3. Capital productivity, rub. (page 1/page 2), FO | 1.666 | 2.088 | 0.422 | 25.336 |
| 4. Capital productivity of the active part, rub. (page/page 2a), FOa | 11.799 | 12.484 | 0.685 | 1.058 |
| 5. Share of the active part in the total cost of fixed assets, in fractions of units, da | 0.141 | 0.167 | 0.0261 | 1.185 |
by 0.307 rub. by increasing the share of the active part in the total cost of fixed assets: ∆FO da = 11.799 * (0.167 - 0.141)
by 0.115 rub. – due to increasing the return on the active part of fixed assets: ∆FO a = (12.484 - 11.799) * 0.167
Using these data, you can also determine what impact the indicators of use of fixed assets and their structure had on changes in production volume.
The table shows that the total change in production volume amounted to 51,400 thousand rubles. due to:
due to a change in the volume of fixed assets by 11578.032 thousand rubles: FO a da a (F 1 - F 0) = 11578.032
due to the fact that the capital productivity of the active part increased by 1.058%, this led to an increase in the volume of production by 10811.345 thousand rubles: (FO 1 - FO 0) da 1 F 1 = 10811.345
Capital productivity shows the volume of production of products (services) per 1 ruble of the cost of the equipment used. Calculation and analysis of the indicator allows the financial director to determine how efficiently the company uses fixed assets and to select the most efficient production equipment. In this article we will tell you how to find return on capital and what ways to increase it.
What is capital productivity
Capital productivity is a financial ratio that shows in dynamics how efficiently and intensively the fixed assets or funds of an enterprise are used. The term is similar to the English Fixed assets turnover ratio, which economists translate as fixed asset turnover ratio or asset turnover ratio. Next, we will tell you how to calculate the indicator.
General formula for capital productivity
In general, capital productivity of fixed assets is calculated as the ratio of revenue to average annual cost of fixed production assets . The formula for calculating the capital productivity ratio looks like this:
K capital productivity = Revenue / Average annual cost of fixed assets
How to find revenue
To calculate capital productivity, gross revenue is used, which has not yet been reduced by taxes. To calculate revenue , use two methods - cash or accrual method. The cash register takes into account the funds received in the company's bank accounts or cash register, and goods received through barter. The accrual method takes into account payment obligations that arise from the buyer at the time of receipt of goods, provision of services or performance of work.
How to find the average annual value of fixed assets
Average annual cost of fixed production assets without taking into account the months actually worked:
C av = (C ng + C kg) / 2,
C av - average annual cost;
With input - the cost of funds that were introduced;
With output - cost of withdrawn funds.
Calculation of the average annual cost taking into account the actual months worked:
C av = C ng + (M input / 12)*C input - (M output / 12)*C output,
M input - the number of fully worked months after the commissioning of the object;
M withdrawal - the number of fully worked months after the withdrawal of the object.
Balance calculation formula
Normative value
The capital productivity ratio is unique for each company. There is no single normative meaning for it. The comparison of the coefficient is carried out mainly with its values for previous periods. In addition, when comparing k with industry average values, the competitiveness of the enterprise can be determined. If the coefficient is higher than the industry average, then competitiveness is growing. If it is lower, it falls.
How to determine the reasons for changes in capital productivity
Analysis of the dynamics of capital productivity allows the financial director to monitor the efficiency of use of production assets. The specialists of the Financial Director System have prepared a solution that will help to correctly calculate capital productivity, analyze its dynamics, and determine the reasons that caused its changes. It will be useful for developing measures to improve the efficiency of equipment use, as well as for a preliminary assessment of measures that may affect it.
How to increase capital productivity
The indicator makes it possible to qualitatively analyze the company’s activities and promptly adjust work plans.
You can increase capital productivity by:
- improving the quality of labor and the quality of manufactured goods ( );
- more full utilization of production capacity;
- labor automation and innovation;
- development of a sales network and sales promotion.
It has been experimentally established that the greatest effect is achieved with a more complete utilization of the active part of funds, with additional training of personnel and their retraining, a general improvement in production standards and a reduction in lost working time.
There are many different analytical tools that are used to study the performance of organizations. Some of these instruments clearly reflect the appropriateness of spending financial resources during the reporting period. Such indicators include the level of profitability, the rate of asset turnover and capital productivity. In this article, we propose to look at how to calculate capital productivity and talk about how to correctly use this analytical tool.
Capital productivity is a financial ratio that characterizes the efficiency of using the organization's fixed assets
Return on assets: what is it?
To begin with, we propose to examine the question of what capital productivity is. This indicator is used to display the amount of company income received through the sale of assets that belong to the fixed assets of the enterprise. The calculation of this coefficient allows you to obtain information about the effectiveness of the use of fixed assets. This group includes those assets whose value exceeds forty thousand rubles. It is important to note that these assets must be used in the production process for more than twelve months.
It is important to note that the indicator in question refers to dynamic values. This means that to obtain accurate data, you should study the company's activities over the past few years in detail. This step allows you to compare and identify the most effective methods of using the fixed assets. Many analysts, when making calculations, compare a particular company with its closest competitors. When conducting such events, it is very important that the selected firms are of a similar size.
According to experts, conducting an analysis of just one year of a company’s activity will not bring the desired result.
Using the capital productivity ratio allows you to determine the effectiveness of the operation of the main assets of the enterprise. When making calculations, you should take into account the market segment in which the company operates. In addition, economic indicators that can have a direct impact on the financial condition of the organization are taken into account. These indicators include:
- Inflation rate in a specific region.
- The level of demand for the product or service offered.
- The duration of each stage of economic cycles.
Ratio Analysis
Having studied the characteristics of the analytical tool in question, we should move on to talking about how capital productivity is measured. Since this coefficient has a dynamic value, when making calculations it is more advisable to use percentage values and fractions. It should be noted here that there is a whole list of various factors that can have a beneficial effect on the value of capital productivity. These factors include:
- Increasing production capacity through the introduction of new technologies and the acquisition of new equipment.
- Introduction of an automated production process in order to increase the quality of products.
- Elimination of factors that caused the suspension of the use of the company's fixed assets.
Capital productivity shows how much revenue is generated per unit cost of fixed assets It is important to note that the commissioning of new machines and production units can lead not only to an increase, but also to a decrease in performance. An increase in the reduction in capital productivity can be triggered by an increasing number of downtimes and an increase in the cost item associated with the production process. As practice shows, the presence of unused assets and obsolescence of technologies are the main factors contributing to the decline in this indicator.
How is the indicator calculated?
Having dealt with the question of what capital productivity shows, we should move on to considering the rules for drawing up calculations. To obtain information about the value of capital productivity, parameters such as the price of the company's main assets and the amount of revenue received over a certain time period are used. Experts recommend using revenue in calculations, since this indicator clearly demonstrates the amount of money received from the provision of services or the sale of manufactured goods. However, using this parameter is not always advisable. In some cases, a parameter such as profit received through sales should be used. This parameter is used in situations where manufactured goods have a low cost, the amount of which does not exceed thirty percent of total income.
When carrying out the analysis, you can use both the full value of the company’s assets and the active component. The last parameter displays the size of the fixed assets that are used in the production process. The latter technique is used in situations where the company has unused equipment in its warehouse. Also, when making calculations, non-productive real estate on the company’s balance sheet is not taken into account.
The capital productivity indicator characterizes the ratio of the company's income obtained through the sale of commercial products and the value of the enterprise's main assets. These indicators are reflected in rubles. This means that in addition to the percentage ratio, the indicator in question can be reflected in monetary units of measurement.
General formula
In order to determine the size of capital productivity, you can use the following formula: “B/SA=FO”. In this formula, “B” reflects the amount of revenue received from the company’s main line of business, and “CA” represents the value of the company’s fixed assets.
In order to calculate the amount of revenue for a specific period, it is necessary to multiply the production volume by the final cost of one unit of marketable products. To determine the total value of the company's fixed assets, the formula is used: “(CA1+CA2) / 2 = CA.” In this formula, the “CA1” indicator demonstrates the value of assets at the beginning of the reporting period. "CA2" reflects the price of assets at the end of this time period.
The capital productivity indicator itself does not indicate the efficiency of use of production assets Balance calculation
In order to find out the size of the ratio under consideration, two main accounting documents should be prepared: a financial statement of the company’s profits and losses for a specific period and a balance sheet. Financial statements store information about the amount of income of the company for various years of activity. The balance sheet reflects the value of the company's main assets.
Capital productivity formula for calculating the balance sheet:
“line 2110OFR/line 1150BB*100%=FO”, where
- Page 2110OFR– a line of financial statements where information about the amount of revenue of the company is posted.
- Page 1150BB– the value of the company’s main assets.
- FO– the value of capital productivity, expressed as a percentage.
In order to obtain objective data on the use of the company's fixed assets, it is necessary to make calculations of the average annual value of the capital fund. To do this, you should add up the value of assets at the beginning and end of the reporting period. The result obtained should be divided by two. As mentioned above, when making calculations, you can use not only the amount of revenue, but also the total amount of profit received through the sale of marketable products. When using this parameter, the formula is applied: “line 2200OFR/line 1150BB*100%=FO”.
Sample calculation
In order to better understand the rules for drawing up calculations, you should consider a practical example. Let's imagine a company that processes precious metals. Since the cost of this product is high, when making calculations it is more appropriate to use such a parameter as the amount of revenue. It is important to note that the enterprise in question uses all its assets, which allows the full price of the fixed asset to be taken into account.
Capital productivity shows how the volume of products received from the sale of products (i.e., revenue) correlates with the cost of the organization’s existing means of labor In order to calculate the capital productivity ratio, it is necessary to obtain information about the company's revenue for the reporting period. In our case, the revenue amounted to 7 million rubles. The value of assets at the beginning of the reporting period was 2.5 million rubles, and at the end - 3.2 million rubles. Having all the necessary parameters available, you can begin to make calculations: “7 ml / (2.5 ml + 3.2 ml) = 1.22.”
The result obtained means that the capital productivity is 1.22 rubles. This means that for every ruble invested in the assets of the enterprise, there are 1.22 rubles of net profit.
How to increase capital productivity
In the case of the coefficient under consideration, there is no normative value standardizing each industry. According to experts, automated production has a low indicator in comparison with those areas that have a small number of assets stored on the balance sheet. When making calculations, you should take into account the change in the coefficient over several years of the enterprise’s activity. The increase in capital productivity clearly demonstrates the effectiveness of using production units and other equipment.
There are several main methods for increasing this indicator. Such methods include the liquidation or sale of those assets that are not used by the company. In addition, the company's management can draw up a plan for more effective use of machines and instruments in order to increase the company's production capacity. A similar effect can be achieved by switching to modern technology and a 24-hour workflow. Increased attention should be paid to the level of professional training of workers involved in servicing devices.
It is possible to increase capital productivity by fully automating the production process, which allows you to increase the level of equipment utilization. Measures aimed at increasing the company's competitiveness through the release of quality goods and the development of its own network of distributors also lead to an increase in the coefficient.
At its core, the capital productivity indicator can be attributed to turnover indicators Conclusions (+ video)
From all of the above, we can conclude that the capital productivity of fixed assets may decrease due to an increase in the value of the company's assets, which are classified as fixed assets. This means that when calculating the financial condition of an enterprise, a number of other factors and indicators that reflect the effectiveness of economic activities should be taken into account. It is important to note that an increase in asset value will sooner or later lead to an increase in capital productivity.
The analytical tool in question allows you to obtain information about the performance of the company. Drawing up calculations taking into account the dynamics of the coefficient allows us to determine the presence of weaknesses in investment activities. The results obtained can be used to develop a new investment strategy, taking into account all necessary adjustments.
The economic activity of an enterprise can be analyzed using a number of indicators. Very often, for this purpose, financial analysis uses data from financial statements, in particular the balance sheet and the income statement - forms No. 1 and No. 2. One of the important indicators of an enterprise’s performance is capital productivity.
Return on assets - definition
In financial analysis, this is an indicator characterizing the effectiveness of investments in fixed assets of an enterprise. It shows what share of revenue comes from each ruble invested in them. Thus, the analyzer will be able to say how effectively machines, equipment, machinery and other fixed assets are used in business activities.
The indicator is calculated based on data from regular financial statements.
Capital productivity. Balance calculation formula.
The basic formula of the indicator is given below:
Capital productivity = revenue from sales: fixed assets.
Thus, the total revenue from the sale of the enterprise must be divided by fixed assets in value terms. We take all data from the financial statements - from the balance sheet, form No. 1 (f-1) and profit and loss report (f-2).
The company's revenue is reflected in F-2, line 2110.
The cost of all fixed assets of a company can be calculated from F-1 data. Since the balance sheet shows us data at the beginning and end of the reporting period, we need to find the average value of the indicator for the period. To do this, the value of line 1150 at the beginning of the period and the same line at the end of the period are summed up and divided by two. That is:
(line 1150 at the beginning + line 1150 at the end): 2
As a result, the capital productivity formula can be rewritten as follows:
Capital productivity = line 2110/((line 1150 at the beginning + line 1150 at the end):2)
Let's look at a specific example. To do this, we present the data from the accounting statements of Caprice LLC in abbreviated form.
We calculate the capital productivity of the enterprise:
Capital productivity = 3,500,000/((163,000 + 170,000):2) = 21.02
Thus, for every ruble of investments invested in the company’s fixed assets, there is a share of 21 rubles in sales revenue.
The resulting result can be compared with data from the industry, market niche, and competitors. There is no standard indicator with which it could be compared. Capital productivity can be analyzed over a number of years. An increase in its value will signal an increase in the efficiency of use of the company's fixed assets.
Mezentseva Vasilisa