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Calculating Economic Efficiency

In: Principles of Management

Author

Listed:
  • Peter Eichhorn

    (OPINIO Forschungsinstitut)

  • Ian Towers

    (SRH Hochschule Berlin)

Abstract

The chapter begins with a discussion of ratios, which are essential for management activities, as they make planning, implementation and supervision easier. There are three types of ratio: classification figures, relationship figures and indexes. Not everything can be captured in numbers, which is where different kinds of performance indicators play a role. There are two main types of calculation methods used in capital budgetin Budgeting g—static and dynamic. Capital budgetingCapital budgeting is involved in investment decisionsDecision . Cost comparison, profit comparison, profitabilityProfitability and payback calculations are examples of static calculations, while the present valuePresent value method and internal rate of returnInternal rate of return method are dynamic calculations. Various tools are presented for optimisation, including linear programmingLinear programming . Forecasting is an essential business activity and tools such as time-series analysisTime-series analysis and regression analysis are described.

Suggested Citation

  • Peter Eichhorn & Ian Towers, 2018. "Calculating Economic Efficiency," Springer Texts in Business and Economics, in: Principles of Management, chapter 7, pages 221-241, Springer.
    • Handle: RePEc:spr:sptchp:978-3-319-70902-4_7
    DOI: 10.1007/978-3-319-70902-4_7
    as

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