When calculating production costs, large organizations also take into account factors such as capital intensity and capital productivity. Let's look at these terms in detail.

Capital intensity is

Capital intensity refers to indicators of the cost of fixed assets of production per one financial unit of manufactured products.

In other words, the company needs equipment, premises and communications in order to ensure the production of products.

Indicators of capital intensity reflect in monetary terms the required number of funds per 1 ruble of manufactured products.

This indicator makes it possible to calculate how many investments the company needs to make to increase production volumes by a certain percentage (subject to the rational use of technology and the need to increase its number).

The value of the indicator makes it possible to understand how much capital investment needs to be increased, to obtain an increase in the number of products produced by the required amount.

At the same time, it is assumed that the equipment is used correctly and without increasing its number, the scale of production will not be able to significantly increase.

Capital intensity indicators are used in industries such as capital construction, mining, timber harvesting and other industries where a high level of capital capacity and production volumes depend to a small extent on intellectual components.

Factors affecting capital intensity

To increase production scale and reduce production costs, temporary replacement funds are used, provided that equipment is used that does not require large capital investments.

Capital intensity indicators decrease in those cases when during production one machine or all working equipment that is produced at a given production site is additionally operated.

An important factor influencing the level of capital intensity is the reduction of equipment idleness, and therefore the volume of manufactured products increases. Due to the increase in production volumes, the share of advanced funds is also growing.

Define the concept of total capital intensity, which is divided into direct and indirect:

• The straight line characterizes the amount of capital investment for the acquisition equipment for specific manufacturers, the performance of which is subject to analysis.
• Indirect capital intensity means financial costs for the purchase of production equipment for partner enterprises. In the case where an organization has several partners, the indirect capital intensity of each of them is taken into account.

Formula for calculating the capital ratio

Capital intensity indicators are calculated according to the following formula:

• K=1/capital productivity=cost of fixed assets/volume of output

Most often in calculations they use average annual indicators, namely:

• K=(fixed assets at the beginning of the year + fixed assets at the end of the year)*0.5/Revenue

These indicators express the return on fixed production assets.

Capital ratio analysis

Capital intensity ratios are usually analyzed based on data for several years.

The indicators are assessed as follows:

• when the odds increase this is a sign that production efficiency is decreasing;
• if the indicator is reduced, this means that the efficiency of using equipment in production increases;
• if the level of capital intensity exceeds the industry average, this is regarded as a sign of a decrease in production efficiency relative to similar companies in the industry;
• when the ratio is reduced relative to the industry average, this indicates that the performance of fixed assets is increasing.

Capital intensity of industries

Using the capital intensity ratio, the optimization of all production processes is assessed and used to analyze the efficiency of both the enterprise and industries as a whole. These data are considered indicators of the ratio of production assets to gross product.

There are two types of capital intensity of the industry, direct and complete:

• Indicators of direct capital intensity allow us to assess the degree the effectiveness of funds that were used in the production process of products.
• The total capital intensity also takes into account those funds which were indirectly used in product production processes.

A value such as the capital intensity ratio is considered mostly auxiliary, while capital productivity can be considered a major one.

Capital productivity and capital intensity

The capital productivity indicator is used to analyze the level of efficiency of fixed assets. This coefficient is calculated based on the annual production volumes of products and the total cost of funds.

If we are talking about capital productivity of industries, then the determining factors will be data on gross value added.

In other words, the capital productivity ratio is the result of dividing production volumes by the average amount of fixed assets from the primary cost. Determining capital productivity allows you to know exactly how much profit an enterprise has from 1 ruble of fixed assets.

Reciprocal value of capital productivity- this is data on the capital intensity of the enterprise, which indicates what part of the production assets accounts for 1 ruble of manufactured products.

Consequently, with the rational use of funds, capital productivity indicators increase, and capital intensity indicators decrease.

Capital productivity

Capital productivity is one of the most important indicators in the process of performance analysis work of manufacturing companies.

With its help, you can assess the effectiveness of the enterprise in the market.

When carrying out the analysis, it is necessary to take into account the fact that capital productivity indicators reflect revenue (namely, the volume of products that were sold) and the means of labor that the manufacturing enterprise has.

It can be said that based on the capital productivity ratio, it is impossible to fully characterize the degree of efficiency in the use of a company's production assets.

Fixed assets

Fixed assets are a share of a company's assets that are used over a long period of time, with costs transferred to products as they are used. They are classified as production assets.

Fixed assets are like your own(belonging to the manufacturing company), both rented and.

Depending on the extent to which they interact with objects of labor, they are divided into passive and active.

Calculation of capital productivity: formula

Based on the calculation results, it is possible to establish how much product is produced by the manufacturing enterprise using 1 unit of labor, and in most cases this coefficient is taken as the main indicator of the rationality of the distribution of company funds.

Return on assets must be calculated when the efficiency of using funds from different companies is compared.

Using this indicator, you can assess how competently the company's management manages its assets.

If the capital productivity ratio is high, then the funds are used rationally, low indicators indicate the opposite.

As a result of calculations, incorrect indicators may be obtained for the following reasons:

• discrepancies in accounting policies in different companies;
• probability of overestimation of reported revenue received as a result of sales of products;
• the funds used have different degree of wear;
• due to inflation there is price increase.

An example of solving a problem about capital productivity

Let us give an example of solving the problem of determining the growth of capital productivity and product output at an enterprise.

Given:

• annual sales volume is 200,000,000 rubles;
• fixed assets(average) make up 150,000,000 rubles.

Question: What amount of additional products will be produced by the company if the level of use of fixed assets is increased by 2%?

Note. By increasing the level of use of production assets, we mean the post-capital productivity indicators, namely, an increase in the volume of output at the existing capacity of the enterprise.

So, let's produce calculation using the formula:

• Capital productivity = revenue/average cost of funds

Capital productivity = 200,000,000/140,000,000 = 1.4

• 1,4+2%=1,43

We calculate production volumes:

• 140 000 000*1,43=202 000 000

• 202,000,000-200,000,000=2,000,000 rubles.

Answer: 2,000,000 rubles.

Factors influencing capital productivity

Capital productivity is calculated based on indicators of the volume of product output and factors that influence these indicators include:

• volumes of products produced and their cost;
• indicators of composition and structure fixed assets;
• performance level, cost and other characteristics equipment used in production processes;
• degree of wear of the components of the main fund;
• part of the components of fixed assets, which is not used in the production process.

In addition to the above points, factors influencing the level of capital productivity include indicators on the use of production space and the capacity of the enterprise.

For the effective operation of an enterprise, it is important to control the level of income and expenses. This is possible when calculating capital investments made to develop the production cycle.

Expenses for the purchase of equipment are paramount. They form the basis of production means.

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When making calculations, the capital intensity ratio must be taken into account. It is necessary to assess the rational use of funds that are basic in the production cycle.

The essence of the concept

Capital intensity is a value that is calculated based on the cost of production assets when converting them into the ruble equivalent of finished products. The capital intensity ratio can be calculated using a special formula. The cost of fixed assets (Co) must be divided by the volume of products produced during the activity (P).

The value changes when the company's process optimization decreases or increases. The more efficiently equipment and fixed assets are used, the greater the amount of output that can be obtained. Then the capital intensity indicator may decrease.

As the coefficient increases, it decreases. As a result, the enterprise receives greater profits and economic efficiency of the production process. At the same time, the funds invested in production will be repaid in full.

To calculate capital intensity, the basic formula given above is used. But it has some disadvantages. Among them is the lack of accounting for the depreciation of production assets, which leads to the constancy of their prices. Also, when calculating, all products produced are taken into account. However, some part cannot be sold.

According to this formula, it is possible to evaluate the production and technological process, reflecting its dynamics. To assess the production efficiency and payback of goods, you need to use another formula: Fe = ½(Co1+Co2)/Pr. In it, the value of Co1 is taken to be the cost of means of production at the beginning of the billing period, and Co2 - at the end date. Etc. is a value reflecting the quantity of goods sold.

Data for the calculation can be taken from documents reflecting production, price and sales of products for a specific period. It is also important to calculate the restoration amount. It will be needed to increase production output. In this case, you need to focus on the formula Fe = Ss.g./Pg.

In it under Ss.g. refers to the cost of means of production obtained on the basis of average annual calculations. Pg reflects the quantity of products that should be produced within 12 months according to the plan. Each indicator is prescribed in the business plan of the enterprise.

When determining the cost of equipment involved in the technological process, the full value is taken. those on the balance sheet are not taken into account.

Dependence on industries

The capital intensity ratio is required to optimize production processes and evaluate the efficiency of the enterprise. Normative meaning also helps to analyze all industries as a whole. According to such data, the ratio of production assets to gross product is calculated.

Among the types of capital intensity, direct and full are distinguished. When calculating the direct indicator, the degree to which results are obtained by the funds that were involved in the production process when creating products is assessed.

If it is necessary to estimate the total capital intensity, then those funds that were used indirectly in the creation of products are also taken into account. Capital ratio is an important indicator. But it is still considered auxiliary, since paramount importance is given to capital productivity.

Formulas of the main components

When using fixed assets, three important indicators are determined:

• recoil;
• capacity;
• armament.

Capital intensity is based on the number of production assets used to produce products. The size is determined in relation to one ruble of the cost of the product.

Capital productivity shows the amount of output obtained from each ruble invested in fixed assets. On its basis, economic efficiency is determined.

Capital intensity and capital productivity are reciprocal quantities. With efficient and improved use of production means, increased output and reduced capacity are produced.

To calculate capital productivity, the allocation of working machines and equipment that make up the active part of the funds is made. To compare growth rates and plan implementation, it is necessary to take into account the value of the basics of industrial production per 1 ruble and the cost of equipment for the same amount.

The second indicator is ahead of the first if there is an increase in the share of the active part of fixed assets.

Recoil

Capital productivity shows the use of the enterprise's fixed capital in economic and industry assessment. To calculate it, it is important to know the amount of output and the cost of production assets.

The capital productivity indicator determines the volume of production per unit of fixed assets. Based on this indicator, production efficiency is determined. The expression of quantity can be in kind or in money. The calculation is made in general for all funds, as well as for part.

The value is determined at various economic levels:

Fo	Capital productivity.
VP	Output.
Soph	Cost of fixed assets.

Fixed assets are calculated from the ratio of the average annual cost of capital. But in some cases it is important to take the cost of these funds for the initial and final billing period. Then the funds are added up and divided by 2.

Armament

Capital-labor ratio is an indicator that reflects the efficiency of using a company's production assets. It shows that employees have the means to carry out production.

Among them are:

• tools;
• machines;
• equipment;
• transport;
• building;
• buildings, etc.

The balance sheet must be used for the calculation.

Changes in the capital-labor ratio are observed when personnel leave or equipment breaks down. Then the residual value of the funds is taken.

How to calculate the capital ratio

To analyze the efficiency of using funds and the company's activities, certain values ​​can be calculated. The main one is capital intensity. To carry out the calculation, you need to know the balance sheet of the enterprise’s accounting department, taken for a specific period of time. A report showing profits and losses during the period under study is also important.

To calculate, you need to follow a certain sequence:

1. You need to determine the cost of fixed assets that have an average annual expression. To do this, you need to add up the cost at the beginning and end of the period, recorded in line 120 of the balance sheet. The result obtained is divided by 2. When planning capital intensity, data from the business plan and program are used.
2. Next, the cost of products that were produced over 12 months is calculated. You need to focus on the annual profit and loss report of the enterprise. When planning, you need to refer to a business plan or program.
3. Capital intensity is calculated using the formula Fe=Co/B, where the first value is the average annual cost of fixed assets, and B is the cost of products produced over 12 months. The resulting value will be the capital intensity of the enterprise.
4. If you need to calculate the capital intensity according to the plan, you need to refer to the business plan. You can also use planned and actual indicators for the past period. An analysis is made based on the data.

Balance overview

The calculation is made on the basis of reporting data on financial indicators and the balance sheet. Income is reflected in the first document, and fixed capital in the second.

The capital intensity will be equal to COR = page 1150 BB (the value of fixed assets by BB)/page. 2110 OFR (reported income).

When calculating the capital intensity of products, you can rely on another formula: COR = page 1150 BB/page. 2200 OFR, where the last value is the company’s profit when selling products based on the financial result.

Condition and usage analysis

Product output can increase and decrease when certain indicators change.

These include:

• availability and use of labor (industrial and production means);
• the company's provision of material resources and their use;
• labor resources used and available.

The analysis must take these factors into account. In this case, the assumption is made that they had equal conditions and acted according to the stipulated plan.

An increase in production volumes occurs with an increase in the amount of fixed assets.

Analysis of fixed assets is carried out on the basis of:

• annual balance sheet report;
• inventory cards;
• invoices for internal movement;
• acts of acceptance and transfer of fixed assets for repair, reconstruction, modernization.

The analysis begins with a study of fixed assets. The relationship between different groups and the total cost is calculated. It is important to increase the UV of active equipment.

• updates;
• disposals;
• growth.

After this, the age of the equipment is determined to determine the nature of the technical condition. Fixed assets are calculated based on depreciation and serviceability coefficients. When comparing indicators for a certain period, one can note the trend of their change.

After this, mechanized, automated, complex automated levels are determined based on the total cost of specific types.

Changes in service indicators are carried out in accordance with the level of mechanization and automation of labor. The number of workers using a specific type of equipment in relation to the total number of employees is taken into account.

Among the indicators of equipment use, there are several types:

After a complete analysis of the work, a generalization is carried out. On its basis, production reserves for fixed assets are determined.

Among them are:

• introduction of equipment that was not previously installed;
• increasing the number of equipment operation changes;
• refusal of equipment downtime outside the plan and within the shift;
• reduction of time losses during equipment operation;
• preparation of organizational and technical measures that will reduce the time spent on equipment operation when producing one unit of product.

Capital intensity must be studied to improve enterprise productivity. To develop measures, it is calculated together with capital productivity and capital-labor ratio.

Attention!

• Due to frequent changes in legislation, information sometimes becomes outdated faster than we can update it on the website.
• All cases are very individual and depend on many factors. Basic information does not guarantee a solution to your specific problems.

They are of great importance for the effective functioning of the enterprise. Improving the quality of their use can solve many problems associated with production. Moreover, they affect both an individual company and the industry and, ultimately, the economy of the entire country. Effective use of fixed assets allows you to increase the volume of output, reduce production costs, increasing And this directly affects the increase in return on capital, profitability and, ultimately, the growth of the standard of living of society as a whole. To achieve these goals, it is important to regularly analyze the degree of utilization by the enterprise using various generalization factors. One of the most important in this case is capital productivity. It shows the level of turnover of fixed assets and allows you to determine how efficiently they are used in production. It is this indicator that we will talk about in the article.

Return on Capital: Definition and Meaning

As already mentioned, this coefficient characterizes the level of use of available capital in an enterprise, industry and the economy as a whole. It is determined on the basis of two values ​​- the issued commodity or the cost of fixed assets of production.

Capital productivity shows the volume of production per unit of fixed assets, and depending on this, the degree of their use or efficiency is determined. Moreover, the value of the goods produced can have both physical and monetary expression (volume or value). And the return on assets indicator itself can be calculated for all funds, and only for part of them.

Calculation of capital productivity: formula

At different levels of the economy, the capital productivity indicator can be calculated. At the same time, he shows the same thing, namely, the efficiency of production in relation to the use of capital, but on different scales. At the enterprise level, to calculate this coefficient, the annual volume of products produced is taken. At the sectoral level, gross or gross output is used, and at the scale of the country's economy, the value of gross domestic product is used.

The capital productivity of fixed assets shows the volume or cost of this product per unit (ruble). The coefficient is calculated using the following formula:

As a rule, the average annual cost of capital is taken, but a number of authors tend to have a different opinion regarding this indicator. Thus, the formula often uses the cost of acquiring these funds (primary) or a value determined in this way:

(funds at the beginning of the period + funds at the end of the period) / 2.

In any case, the meaning of the calculation does not change. Capital productivity shows the ratio of products produced to the funds invested in them.

Capital productivity and capital intensity

The opposite of the indicator we considered is the capital intensity ratio. You could say these are two sides of the coin. What does capital productivity and capital intensity show the owner of an enterprise? If the first speaks about the degree of use of fixed assets, then the second speaks about the need for them. Capital intensity illustrates the amount of fixed assets per ruble of product produced. It is determined by the formula:

1/capital productivity or cost of fixed assets / output.

Having calculated this coefficient, the owner of the enterprise receives information about how much financial resources need to be invested in fixed assets in order to obtain the required volume of production. If capital intensity decreases, then this indicates labor savings.

Both indicators characterize the efficiency of using existing capital. If it increases, then capital productivity also increases, and capital intensity, on the contrary, decreases. Is this a good trend? and every enterprise, one way or another, strives for it.

Factors influencing capital productivity

Return on assets shows how successfully the enterprise operates. This is influenced by many different reasons, including those outside the production process. Let's look at what helps increase capital productivity:

• technical re-equipment, modernization and reconstruction;
• better use of capacity and operating time;
• reducing the cost per unit of power at the enterprise;
• change in the structure of funds (increase in the ratio between production and non-production assets);
• better utilization of working capacities;
• market and other factors.

In addition, improvements in product quality should also be taken into account. All other things being constant, it also contributes to more efficient use of capital, increased capital productivity and, consequently, profitability.

Conclusion

To operate effectively, each enterprise must regularly calculate and analyze ratios such as capital intensity and capital productivity. Such an analysis shows a lot, because it allows you to assess the degree to which an enterprise uses its fixed assets and determine the need for them to achieve certain production goals.

In this article we will look at the capital ratio. Let's find out what affects the ratio and analyze the calculation of capital productivity. Let's talk about errors in calculations.

Often, a business plan requires the calculation of a coefficient such as the “capital intensity ratio”. This article will cover this issue in detail, which will allow the entrepreneur to make the most accurate calculations of the necessary production costs.

What is included in the concept of capital ratio?

Capital intensity is a financial indicator that reflects the efficiency of use of fixed assets by an enterprise. This indicator is the cost of fixed assets per unit of output.

Without fixed assets, the existence of an enterprise is impossible - thanks to them, the enterprise has the opportunity to produce and sell products. The main assets include:

• building;
• production equipment;
• vehicles, etc.

Thanks to the value of this indicator, the manager decides on the feasibility of increasing production capacity.

This indicator is not effective in all industries. The feasibility of using the capital intensity indicator is appropriate in those areas where the production process does not fully depend on intellectual investments:

• logging production;
• capital construction;
• mining industry, etc.

Factors influencing the capital ratio

The capital ratio of an enterprise is influenced by:

• production capacity utilization;
• average annual cost of fixed assets;
• volume of products produced by the enterprise.

Capital intensity ratio: calculation formula

To calculate the capital intensity ratio, reporting and accounting documentation containing the volumes of products produced by the enterprise are used.

The coefficient is calculated using the formula:

Capital ratio

=

1

/

Capital productivity

=

Cost of fixed assets

/

Volume of products produced

But in practice, average annual indicators reflected in the financial statements are more often used. To calculate the capital intensity ratio, the following criteria must be taken into account:

• fixed assets as of January 1 of the accounting year;
• fixed assets as of December 31 of the accounting year;
• revenue received by the enterprise in the accounting year.

The calculation is made using the following formula:

Calculation of the ratio on the balance sheet

To calculate the capital ratio, it is very convenient to use the balance sheet. To carry out the calculation, you need to take the following indicators:

• line 1150 at the beginning of the year (Appendix No. 1 to Order of the Ministry of Finance of the Russian Federation dated July 2, 2010 No. 66n);
• line 1150 at the end of the year (Appendix No. 1 to Order of the Ministry of Finance of the Russian Federation dated July 2, 2010 No. 66n);
• line 2110 (Appendix No. 2 to Order of the Ministry of Finance of the Russian Federation dated July 2, 2010 No. 66n).

The calculation will be made using the following formula:

For example:

ABC LLC, which carries out logging work, has the following indicators in its accounting report:

• line 1150 at the beginning of the year – 3,560,380 rubles;
• line 1150 at the end of the year – 4,180,360 rubles;
• line 2110 – 13200000 rubles.

The capital intensity ratio will be:

3560380 + 4180360 * 0,5 / 1320000 = 0,29.

How to interpret the value of the capital intensity ratio?

It is necessary to understand that the higher the capital intensity ratio, the less efficiently production capacity is used. In this case, the manager needs to look for opportunities for rational use of equipment in order to optimize the production process.

What does the analysis of the capital ratio show?

It is impossible to analyze the capital intensity ratio of an enterprise by obtaining the volume of the indicator for 1 year - for a qualitative analysis, results of several years are needed. As a result of the work carried out, you can see a rather interesting picture:

The value of the capital ratio	A comment
The capital ratio is increasing	This trend indicates that production efficiency is decreasing. This means that some fixed assets are not fully involved in the production process. As a rule, this can be idle equipment, unused production areas, etc.
The capital ratio is decreasing	This trend suggests that production efficiency is increasing, i.e. fixed assets fully fulfill their purpose in producing products.
The enterprise's capital intensity ratio exceeds the average capital intensity ratio for the industry	In this case, we can talk about a decrease in the efficiency of use of production capacity by a particular enterprise compared to competing enterprises that form the industry average.
The capital intensity ratio of the enterprise is below the average capital intensity ratio for the industry	In this case, the capital intensity ratio indicates the high efficiency of use of means of production by this enterprise compared to its competitors. This indicator allows us to consider the enterprise as a competitive player in the production market.

For example:

ABV LLC, which carries out logging work, has the following indicators:

Indicators	2015	2016	Changes
Fixed assets	3165740	4184540	+1017000
Revenue	10160000	12580000	+2420000
Capital ratio	0,31	0,33	+0,02

Based on the obtained indicators, it can be argued that, despite the problems in the rational use of production capacity, in the context of the industry average, ABV LLC can be considered as a serious competitor.

How is analysis of capital intensity of industries useful?

The capital intensity ratio makes it possible to assess the rationality of using production capacity of both the enterprise itself as an introspection, and a comparative analysis of the enterprise in the context of the manufacturing industry as a whole.

In the case of calculating the industry capital intensity ratio, the basis is taken:

• production funds;
• gross product.

It is customary to consider two types of capital intensity:

Type of capital intensity

The role of economic efficiency analysis fixed assets for the successful functioning of the entire enterprise cannot be overestimated. In this case, three main indicators are usually used - capital productivity, capital intensity and capital-labor ratio. As a rule, their change in dynamics is considered.

Based on the results of the study, conclusions are drawn about the rationality or irrationality of using available funds, errors and problems are revealed, and reserves for increasing the efficiency of using fixed assets are discovered.

Average annual cost of fixed assets

To calculate indicators of capital intensity, capital productivity and capital-labor ratio, the value is used "average annual cost of fixed assets". The formula for determining this indicator is as follows:

OS environment = OS ng + OS input * N1 / 12 - OS select * N2 / 12

• OS ng- cost of fixed assets at the beginning of the year,
• OS input- cost of fixed assets put into operation during the year,
• OS selected- the cost of fixed assets disposed of during the year,
• N1- number of months of use of introduced fixed assets,
• N2- the number of months during which the retired fixed assets were not used.

The value of fixed assets at the beginning of the year can be taken from the balance sheet. To determine the cost of fixed assets put into operation, you need to familiarize yourself with the debit turnover in account 01 “fixed assets” (the source of information can be the balance sheet for this account). To calculate the value of funds written off from the balance sheet, it is enough to look at the credit turnover on the same account.

Capital productivity

The capital productivity indicator is calculated as follows:

Capital productivity = Volume of total output / Average annual cost of fixed assets

Capital productivity shows how much finished product falls on 1 ruble of fixed assets. That is, the higher the value of capital productivity, the more efficiently the enterprise uses its fixed assets. Accordingly, an increase in the indicator over time is assessed positively.

If the opposite situation occurs, this is a serious reason to think about the reasons for the irrational use of existing equipment. After all, over time, problems can lead to significant losses for the enterprise itself.

Capital intensity

The capital intensity indicator is the inverse of the capital productivity indicator and is calculated using the formula:

Capital intensity = Average annual cost of fixed assets / Volume of output.

The value of capital intensity shows how much fixed assets falls on each ruble of finished products. Naturally, the lower this indicator, the more efficiently the enterprise’s equipment is used. A decrease in the indicator over time is a positive trend in the development of the enterprise.

Capital intensity (FE) and capital productivity (CR) are paired and interrelated indicators. If one quantity is known, another can be found by subtracting the known exponent from one.

If there is a situation at an enterprise in which the FE increases and the FE falls, this means that production capacities are being used irrationally and their workload is not full enough. Accordingly, you should start looking for additional reserves as soon as possible.

For example, it may be worth increasing the number of shifts or making the work week six days (which does not mean that each individual employee will work 6 days a week, we are only talking about the redistribution of labor resources).

Capital-labor ratio

The capital-labor ratio reflects employee security enterprise fixed assets and is calculated using the following formula:

Capital-labor ratio = Average annual cost of fixed assets / Average number of employees.

It is possible to draw conclusions about changes in this indicator only if it is linked to the value of labor productivity. If the growth rate of labor productivity lags behind the growth rate of the capital-labor ratio, this indicates an irrational use of the enterprise's resources. Perhaps we are talking about the large number of the organization’s management apparatus or the unmotivated growth of the passive part of fixed assets.

Analysis of these three simple indicators will allow you to promptly recognize problems that threaten the profitability of the enterprise and find ways to eliminate them.