# Stock ratio. Formula calculation. Analysis of the value of the indicator

There are many different indicators that assess the detail of enterprises, the financial condition and the effectiveness of managing human and other resources. Another important area is the economic analysis, which is responsible for determining the level of efficiency of use and the involvement of fixed assets in the production process.

In order to characterize these processes, they use three indicators: capital-intensiveness, capital productivity, capital ratio. The formula for calculating the last indicator is given below. Let us dwell on the capital-labor ratio.

## The concept and value of the indicator

The capital stock is an indicator that helps to determine the degree of security of all employees the main means of the enterprise.

It has a direct impact on the value of indicators such as capital productivity and capital intensity, with which it is often confused.

To avoid this, let us examine what these indicators mean.

## Not to be confused with capital productivity and capital intensity

Capital productivity is the ratio of the cost of production to fixed assets of the enterprise, which are calculated as an annual average. Due to this indicator it is possible to express how effectively all fixed assets are involved in the production process.

Capital-output ratio - an indicator that is calculated to determine the required number of production assets for the production of a unit or a certain amount of products.

## Stock balance. Formula calculation

Wrong are the people who believe that the capital-equipment of fixed assets differs from the capital-labor ratio. This is a misconception.

The fixed assets of fixed assets (the formula for the calculation of which requires the availability of data on fixed assets and the number of employees) is the same indicator as the capital-labor ratio. In the textbooks there is no difference between these concepts, and the formulas by which they can be defined are completely identical.

The indicator of the capital ratio is determined by the formula:

• Фв = ССОФ: СЧ, where
Фв - capital-supply ratio;
SSOF - the average cost of fixed assets during the annual period of time;
SSH - the average number of employees for the year.

The average annual value of fixed assets and the average number of employees are needed to determine the capital ratio. The formula for calculating this clearly shows. How to calculate them, we analyze further.

## The average annual value of fixed assets

This is a special indicator that displays the average total cost of fixed assets of the enterprise. It is used in calculations related to the efficiency of using the company's fixed assets. In order to calculate the required cost, you can use the following formula:

• SSOF = OSN + OSV x P1: 12 - OSvyb x P2: 12, where
OSN - the total value of fixed assets at the beginning of the period;
OSV - the cost of those fixed assets that were put into operation during the period;
OSvyb - the cost of fixed assets that were eliminated during the period;
P1 - the number of months in which the newly introduced fixed assets were operated;
P2 - the number of months in which the retired fixed assets were not engaged in production.

## Average number of employees

This is one of the indicators that you need to know to calculate the capital-labor ratio. The formula for calculating the number is quite simple, if properly understand the very definition of the indicator. The average number of employees is an indicator of an enterprise that reflects the average number of employees of an enterprise for a certain period. It can be calculated both for the month, and for the quarter, year.

It can be calculated as follows:

• SSCH = MF - RB - Ruch, where
MF - the average number of employees for a certain period;
RB - employees who are on leave for child care, pregnancy, childbirth;
The workers who are on leave without pay during the training or entering educational institutions, if such leave is supposed by law.

## Analysis of the indicator of capital-labor ratio

The most important thing is not to make hasty conclusions. You already know what capital-labor ratio is. The formula of calculation is also known to you. All this does not mean that you can correctly interpret the value of the indicator.

Even just knowing the dynamics is not enough. Analysis should be done only in parallel with the calculations of labor productivity. For example, when the capital-labor ratio increases faster than labor productivity, this indicates that the resources of the enterprise are used inefficiently. This situation may indicate an increase in management personnel, which is not forced, since it is not confirmed by the corresponding increase in fixed assets.

Now you know what is the capital-labor ratio (the formula for the calculation is given above in the article), and also understand how it is necessary to analyze the values ​​of this indicator.

Do not forget that this indicator is only part of the economic analysis that is needed to understand the state of affairs of a company. Consequently, knowledge of only the value of capital-stock cannot help to draw the right conclusions about the economic activities of any organization.

Such analyzes are carried out by professional economists working mainly in audit firms. Western corporations in which experienced specialists from all over the world can afford the same pleasure.

﻿