Value Added, Productivity and Performance of few selected Companies in Sri Lanka

Productivity is a measure of the rate at which inputs are transformed in to output. Hence productivity provides the technical relationship that exists between inputs and outputs. Productivity is actually looking at the more general issue of performance. Performance covers both overall economic and operational aspects. It can be described as the success of a company and its activities. So that value added, productivity and performance are closely inter connected. This paper attempt to measure the productivity of the 15 financial companies listed under the CSE using value added ratios such as (i) sales per employee ratio, (ii) labour cost to value added ratio, (iii) profit before tax to employee ratio, (iv) labour cost to sales ratio, and (vi) value added to employee ratio and to measure the performance with the ratios of (i) gross profit ratio,(ii) value added per rupee of fixed asset, (iii) return on capital employed, and (iv) net profit ratio using data representing the period of 2005-2009. The study finds that profit before tax per employee and value added per rupee of fixed asset (VAFA) is positively correlated and labour cost to sales (LS) and gross profit (GP) is also positively correlated. Further the labour cost to value added (LVA) is correlated with gross profit (GP) and value added per rupee of fixed asset and no relationship between the rest of the productivity and performance measures. R2 value of 0.471, 0.315, 0.198 and 0.887 (In all for models) which are in the models denote that 47.1%, 31.5%, 19.8%, and 88.7% of the observed variability in GP, NP, ROCE, and VAFA respectively in all the independent variables such as SE,VE,PE,LS, and LVA. Remaining 52.9%, 68.5%, 80.2% and 11.3% of the variance in GP, NP, ROCE, and VAFA related to other variables which are not explained, because they are not depicted in the models.