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Group of Indicators for Efficiency of Capital Use in Production and Business

Profitability. The larger the value of the "profitability" indicator, the higher the profitability, leading to higher business efficiency. On the contrary, the smaller the value of this indicator, the lower the profitability, meaning that business efficiency is not high.


In there:

Profitability =

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Group of Indicators for Efficiency of Capital Use in Production and Business

- Output reflecting profit can use one of the following indicators: gross profit from sales, net profit from business operations, total accounting profit before tax, profit after tax

- Input or output factors reflect production results similar to the Productivity indicator above.

Loss rate.

The loss rate is an indicator that shows how many units of cost or input factors a business must spend to have 1 unit of output reflecting production results or output reflecting profits. The smaller the value of this indicator, the higher the business efficiency and vice versa, the larger the value of this indicator, the lower the business efficiency.


Loss rate =


1.7.2. Cost efficiency indicators group

Productivity of cost:


Productivity of cost =


This indicator shows how much revenue is earned for every dollar spent.

Cost effectiveness:


Cost effectiveness =


This is one of the important indicators to evaluate the production and business efficiency that enterprises often use. This indicator shows how much profit is earned for every dollar spent.

1.7.3. Group of indicators on efficiency of capital use in production and business


Capital efficiency is an economic category that reflects the level of capital use of an enterprise to achieve the highest results in the business process with the lowest total cost. General formulas:

Capital efficiency:


Capital efficiency =


Revenue per unit of production capital :

Productivity of capital =


This indicator shows the efficiency of using business capital of the enterprise: how much revenue will be generated by one dong of business capital. Therefore, it is meaningful to encourage enterprises to manage capital closely, use business capital economically and effectively.

Profitability ratio based on working capital.


Profitability ratio by working capital =

This indicator shows the efficiency of capital use of the enterprise; how much profit is generated by one dong of capital. It reflects the level of capital utilization of the enterprise.

Indicators for evaluating the efficiency of fixed asset usage


Productivity of fixed assets =


This indicator reflects how many dong of net revenue one dong of average original price of fixed assets brings in?


Profitability of fixed assets =


This indicator reflects how many dongs of net profit (or gross profit) one dong of average original price of fixed assets brings.


Fixed asset depreciation rate =


This indicator shows how much of the original cost of fixed assets must be spent to have one dong of net revenue or net profit.

Indicators for evaluating the efficiency of labor resource use

TSLD turnover =


This indicator shows how many units of net revenue each unit of working capital used during the period brings. The larger this indicator is, the higher the efficiency of using working capital.


Efficiency of using working capital during the period =

Reflects the profitability of current assets. It shows how many units of after-tax profit each unit of current assets generates during the period.


Level of responsibility for labor force =


Indicates how many percent of working capital a business must use to achieve each unit of revenue. The lower this index, the higher the economic efficiency.

1.7.4. Labor efficiency index group.


Labor productivity =


This indicator reflects how much revenue a worker generates, in fact this is the labor indicator of the enterprise. The higher this indicator is, the more effective the enterprise is in using labor, exploiting labor in production and business. The higher this indicator is, the more effective the labor usage in the unit is.


Rate of profit on labor =


This indicator reflects how much profit a worker creates during the period. The higher this indicator is, the better, showing that the business's use of labor during the period is effective.

1.7.5. Group of indicators of equity capital efficiency.


Return on equity =

The above index tells us how much pre-tax profit is generated for every VND of equity involved in production and business. This index also shows the financial independence of the company, because this ratio shows the profitability of capital when put into production and business. The higher this index is, the more effectively the business uses its capital.

1.7.6. Group of indicators for evaluating corporate finance

Ability to pay


General solvency ratio =


This indicator reflects the overall payment capacity of the enterprise during the business period, indicating how many dong are guaranteed for each loan dong. If this value of the enterprise is always 1, the enterprise ensures payment capacity and vice versa.


Current ratio =


“Current debt payment ability ratio” (also known as current payment ability ratio) shows the ability to meet short-term debts (debts that the business must pay within one year or one business cycle) of the business is high or low. If this index is approximately equal to 1, the business has enough ability to pay short-term debts and the financial situation is normal or positive. On the contrary, if the current debt payment ability ratio is smaller than one, the business's ability to pay short-term debts is lower.


Quick ratio =

“Quick payment ratio” is an indicator used to evaluate the ability of a business to pay short-term debts with money (cash, bank deposits, money in transit) and short-term financial investments. In fact, if the quick payment ratio is >0.5, the payment situation is relatively positive, but if it is <0.5, the business may have difficulty in paying debts and therefore, may have to sell goods and products urgently to pay debts because there is not enough money to pay.

Capital structure coefficient


Debt ratio =


The debt ratio reflects how much borrowed capital a business currently uses for production and business. The higher the debt ratio, the less independent the business is. However, the business benefits because it can use a large source of assets while only investing a small amount of capital, saving on production and business costs.

Therefore, the ability to ensure debt payment from capital sources is low, leading to loss of trust from customers and investors, high business risks, and unsafe for production and business activities.


Fixed asset self-financing ratio =


The fixed asset self-financing ratio shows how much of the enterprise's equity is used to equip fixed assets, reflecting the relationship between equity and fixed asset value and working capital.

Asset structure coefficient


Investment rate in TSNH =


This indicator shows how much of each dong invested in assets is invested in current assets and short-term investments.


Investment rate in TSDH =


The higher the investment rate in assets, the more it shows the importance of fixed assets. In the total assets that the enterprise is using and operating, it reflects the situation of technical facilities, production capacity and long-term growth trend as well as the competitiveness of the enterprise.

However, to conclude whether this ratio is good or bad depends on the business sector of each enterprise in each specific period. Enterprises always want to have an optimal asset structure, reflecting how much of each dong invested in assets is in current assets and how much is in long-term assets.

Performance indicators


Inventory turnover ratio =


Inventory turnover is the number of times the average inventory is rotated during the period. The higher the inventory turnover, the shorter the rotation time. This shows that the company's products are consumed strongly, input materials are also used continuously, which makes the price of raw materials out of the warehouse low, leading to a decrease in product cost, improving the competitiveness of the product.


Number of days 1 HTK rotation =


This ratio indicates the number of days it takes for inventory to turn over. The lower the ratio, the better, indicating the company's ability to quickly recover capital.


Receivables turnover=


The higher the turnover ratio, the faster the business collects its receivables, helping the business to turn over capital faster, creating efficiency in capital use, and preventing other businesses from appropriating its capital. This is always a matter of concern for businesses.


Average collection period =


A small average collection period proves that the business always ensures the fastest recovery of business capital, money is circulated quickly, and capital is not misappropriated.

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