The State and Trends of Enterprises Efficiency on the Basis of Modern Indicators

Abstract

One of the most relevant approaches to determining efficiency is rightly considered the attractiveness of the company in terms of investing in it and receiving remuneration by the owners or managers of the company. From these positions, there are three most relevant indicators of efficiency analysis can be distinguished: Return on Equity (ROE), Return on Assets (ROA), and return on EBITDA (EBITDA Margin). The ROE indicator shows how much profit each invested monetary unit brings on capital and is considered a measure of how efficiently the company's management uses its capital to make a profit. Investors most often consider ROE as acceptable provided that its value is not lower than 14 %, and in the case of a value of less than 10 % is a bad value. ROA describes how well a company uses its assets, determining how profitable a company is with respect to its total assets. ROA is best used when comparing similar companies or when comparing a company with its efficiency over previous periods. ROA takes into account the debt obligations of the company, unlike other indicators (in particular, ROE). The EBITDA margin is considered the monetary rate of return on transactions with real money before capital expenditures, taxes, and capital structure. This eliminates the impact and consequences of non-cash expenses, such as depreciation. Investors and owners can understand how much money is generated for each monetary unit of earned income, and use such an indicator as a guideline when comparing different companies. The low EBITDA Margin indicates that the business has problems with profitability, as well as cash flow problems. On the other hand, a relatively high EBITDA Margin means that business profit is stable. Keywords: efficiency, enterprise, indicator, management.