An important stage in the analysis of economic activity should be called the assessment of various parameters, including business activity. One of the indicators used for this is considered the equity ratio. Business activity is characterized by how dynamically the organization is developing, what goals and to what extent are achieved. All this is reflected in cost and relative indicators.
This procedure allows you to judge how effectively it uses the means at its disposal. This area of analysis of economic activity consists in studying not only the level, but also the dynamics of various coefficients. Business activity is manifested primarily in the speed of turnover of funds available to the organization. Since the sooner the capital makes a “circle”, the greater the volume of production the company will be able to acquire and sell without investing additional finance. Slowdowns, delays at any stage lead to a deterioration in the financial stability of the company. If the turnover ratio of equity capital, on the contrary, increases, then such an important indicator as BOP increases. However, there is one important feature. The turnover Ratio of equity can play a negative role, worsening the financial condition of the company. This happens if a loss occurs as a result of the sale of goods.
Factors affecting the level of indicators of business activity and their dynamics
There are a lot of them, we list only a few. Firstly, the quality of management and the level of organization of the production process affect the rate of return on equity and profitability. The second factor is the structure and main sources of financing. Third, the rationality of the use of available resources. The fourth factor is production volumes, product quality and its structure. Production costs are also important.
Characterization of some coefficients
This is a number of indicators of fixed assets turnover, equity and working capital, assets, inventories. The first indicator reflects how effectively the organization’s OPF is used in a given period. This is a return on assets. The working capital turnover ratio indicates the rate at which both material and monetary resources of the organization are returned. Next, a few words should be said about the coefficient characterizing equity. It affects various aspects of the business entity. He can talk about the excess (lack) of implementation. In addition, this indicator reflects the rate of return on invested capital, as well as the activity inherent in invested investments. Too high a value for this parameter, as well as low, is not very good for the enterprise. In the first case, a significant excess of sales over invested funds is the reason for attracting more borrowed funds. The second option indicates the presence of downtime of a certain share of fixed assets, which means that it is advisable for the management of the enterprise to think about investing in a more efficient source of profit. The turnover ratio of current assets indicates how many turns are performed in one production cycle. And the latter can be called otherwise the speed of implementation. As a rule, the higher the value of the parameter in question, the more liquid the capital, and, accordingly, the overall stability of the organization from an economic point of view.
