THE ANALYSIS OF RELATIONSHIPS AMONG THE TOTAL PRODUCTIVITY, PROFITABILITY AND ECONOMIC VALUE ADDED

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ABSTRACT

The profitability of enterprise activities is one of the evaluation ways of management effectiveness of enterprise operations. The profitability ratios are quite well described in economics and financial literature. The current authors were less focused on the analysis of the ways of how to determine the main factors which influence the level of profitability. This problem is crucial and extraordinary important by the introduction and utilization of new production strategies. The paper defines the Total Productivity and the Total Productivity Break Even Point concept (TP_BEP). It describes the linear model of the Total Productivity Break Even Point with the developed expressions for calculation of a and b regression coefficients. The mathematical models of Total Productivity and EVA were described. Further focus of the paper was on the definition of relationships between Total Productivity an profitability (ROA). The mathematical model of this relationship was developed. The paper introduces the idea of mutual relationship of Total Productivity (PT) and Economic Value Added (EVA). The Break Even Point concept of Total Productivity was used by the development of relationship model of EVA and Total Productivity. The final solution was simplified for easy practical utilization.

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