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A Framework for Profitability and Productivity Measures

Author

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  • Samuel Eilon

    (Imperial College, Exhibition Road, London, SW7 2BX UK)

Abstract

Performance of an enterprise is often measured as a ratio of output to input. It is possible to define a variety of ratios, depending on whether measurements of variables are made in physical or financial terms and depending on which resource inputs are selected for performance evaluation. In addition, ratios may relate current outputs to current inputs, or current outputs to the maximum possible outputs for a given set of inputs, or current inputs to the minimum possible inputs for a given level of output, thereby giving rise to definitions of four production efficiencies. Also, several productivity ratios may be defined, and the network of relationships between them demonstrates how one productivity ratio can improve at the expense of another. The effect of productivity ratios on unit cost can then be explored and the effect of input factor prices (such as wage rates) ascertained.

Suggested Citation

  • Samuel Eilon, 1985. "A Framework for Profitability and Productivity Measures," Interfaces, INFORMS, vol. 15(3), pages 31-40, June.
    • Handle: RePEc:inm:orinte:v:15:y:1985:i:3:p:31-40
    DOI: 10.1287/inte.15.3.31
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    Citations

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    Cited by:

    1. E. Grifell-Tatjé & C. A. K. Lovell, 1999. "Profits and Productivity," Management Science, INFORMS, vol. 45(9), pages 1177-1193, September.
    2. Coelli, Tim & Grifell-Tatje, Emili & Perelman, Sergio, 2002. "Capacity utilisation and profitability: A decomposition of short-run profit efficiency," International Journal of Production Economics, Elsevier, vol. 79(3), pages 261-278, October.
    3. Hamblin, David & Iyer, Arun, 1996. "What difference does your industry make?," International Journal of Production Economics, Elsevier, vol. 43(2-3), pages 155-174, June.
    4. Sahoo, Biresh K. & Tone, Kaoru, 2009. "Decomposing capacity utilization in data envelopment analysis: An application to banks in India," European Journal of Operational Research, Elsevier, vol. 195(2), pages 575-594, June.
    5. Chang, An-Yuan, 2009. "An attribute approach to the measurement of machine-group flexibility," European Journal of Operational Research, Elsevier, vol. 194(3), pages 774-786, May.
    6. Gianluca Marcato & Stanimira Milcheva & Chen Zheng, 2018. "Urban Economic Openness and IPO Underpricing," The Journal of Real Estate Finance and Economics, Springer, vol. 56(3), pages 325-351, April.
    7. Kalu, Timothy Ch. U., 1999. "An algorithm for systems welfare interactive goal programming modelling," European Journal of Operational Research, Elsevier, vol. 116(3), pages 508-529, August.

    More about this item

    Keywords

    accounting: productivity;

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