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What is the business activity of the enterprise

What is the business activity of the enterprise

The stability of the financial situation and the sustainable development of the company is largely dependent on its business activity.

It can be assessed by quantitative and qualitative criteria.

Quantitative assessment of business activity

Financially, the business activity of the companyIt manifested in the turnover of its funds. In this regard, the analysis of business activity and business performance using the speaker indicators (ratios) of turnover. Their importance to the enterprise caused by several reasons. First, the turnover rate depends on the size of the company's revenue. Second, the size of the turnover depends on the relative importance of fixed costs - the higher revenues, lower share of costs. Thirdly, increasing turnover in one step, it implies that the acceleration to another. Overall, solvency and profitability are directly dependent on how quickly the investments in assets are converted into real money.
There are a range of factorsturnover. Among them are the ratios asset turnover and equity, fixed assets and inventories, accounts receivable and accounts payable.
Turnover ratio of assets (capital)It refers to the rate of capital turnover of the enterprise, or how much money is earned each asset in the unit. It is calculated as the ratio of net revenue to the average asset value (equity value).
Turnover ratio of current assets shows the ratio of revenue to the working capital of the enterprise. If this figure is reduced, then it signals a slowdown in the turnover of money.
Receivable turnover ratiodebt ratio is estimated revenues to the average amount of debt. It reflects how many times turned to the funds invested in the calculations with consumers. A high score indicates a rapid preparation of the company accounts for payment.
The turnover of accounts receivableIt is compared with the same - on the accounts. Last expansion coefficient maps (decrease) in commercial loans, which were provided by the company. Its growth means that the company purchases the speed increases, the decline - shows an increase in purchases on credit.
Stock turnoverIt reflects the number of enterprise inventory turns. Its decline suggests the growth of work in progress or on the fall in demand for products. The higher the turnover of inventory, the more stable financial position.
It is calculated as the ratio of production costs to the value of inventories.
Fixed assets turnoveralso called the return on assets. It displays the ratio of net revenue to the value of fixed assets. On the basis of this ratio can be judged on the effectiveness of the use of fixed assets.
Quantitative assessment of business activity caninclude an analysis, not only in relative but also in absolute indicators. The latter include, inter alia, the amount of capital, and the sales profit, and their dynamics.

Qualitative assessment of business activity

Economic activity estimation in terms of qualitythe criteria involves the use of formalized indicators. Among them - the market (volume and growth), the export potential of products, financial services, labor market. They include the number of the company's reputation, the number of loyal customers, the level of fame.
The increase in business activity of the company ismanifested in the expansion of sales geography, product line product line, professional development of employees, efficient use of raw materials. Events on the growth of business activity, as a rule, require significant capital expenditures that pay off only in the long term. They include, for example, a reorganization and expansion of production, repair, expansion of commodity nomenclature.

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