How to determine if an organization is effective or not

The effectiveness of the organization is determined on the basis of the analysis of various factors. These include both financial and economic, as well as socio-psychological, environmental and other indicators.

You will need

• - balance sheet (form No. 1);

• - profit and loss statement (form No. 2);

• - cash flow statement (form No. 4).

Instruction manual

1

Evaluate the activities of the company in terms of financial efficiency by the following parameters: net profit, cash flow, return on investment.

2

Determine the net profit according to the financial statements: in line 2400 of form No. 2 “Report on profit and loss” you will find the amount of net profit since the beginning of the year, and in line 1370 of form No. 1 - the total indicator of retained earnings accumulated during the organization’s activities. Compare the values ​​of the current year with previous periods to track trends in increasing or decreasing net profit.

3

Analyze the cash flows of the company in the form No. 4 balance sheet "Statement of cash flows". Establish sources of income and directions of spending, the most significant cost items. Based on the data obtained, make a conclusion about the effectiveness of the organization's financial flow management.

4

Calculate your return on investment using the formula:

Ri = (Profit before tax) / (Balance sheet - Short-term liabilities) x 100

or Pu = p. 2300 / (p. 1700 - p. 1500) x 100.

Moreover, investments include not only long-term investments, but also other non-current assets: buildings, structures, equipment, trademarks, etc.

5

Evaluate the economic efficiency of the enterprise: does it achieve the goals stipulated by the charter, what is its productivity and profitability. Determine how productive the company’s work is, whether its products meet quality and safety standards, and whether customer demand is ensured. Indicators of energy intensity and environmental friendliness are also very important: high energy consumption and environmental pollution in the production process is one of the evidences of an inefficient enterprise.

6

A successful and prosperous company is also characterized by socio-psychological factors: the labor activity of employees, their satisfaction with work, wages, and relationships in the team. Indicators of effective organization are relative stability, harmony, and the stability of personal interactions between employees.

7

In addition, analyze the management process and evaluate the effectiveness of the organization’s management. The development and adoption of the right decisions ensures the company the effectiveness of production, labor and management.