ASPECTS OF THE ANALYSIS OF ENTERPRISE’S RATE OF RETURN

The main objective of an enterprise is to achieve business efficiency and added value for the owners. The efficiency of enterprise’s business, considered as a separate object of the business analysis, may be expressed either as a ratio of achieved results to the resources used for their achievement, or as a ratio of input resources to the achieved results, due to the use of the same resources. As a resultative indicator, efficiency may be analysed and assessed in three aspects. The first of them refers to the efficiency of use of the enterprise’s production resources. We speak about the enterprise’s fixed tangible assets (production fixed capital), short-term assets (working capital) and workforce. The second aspect refers to the efficiency of income and expenses, and the third one – to the enterprise’s rate of return calculated on varied bases.Rate of return is a summary indicator that characterises the efficiency of the overall business of an enterprise. Enterprise’s rate of return may be analysed and assessed in two aspects. On one hand, rate of return is studied as a resultative indicator by identifying and evaluating the impact of direct factors on its dynamics. On the other hand, rate of return is analysed and assessed as a factor indicator that has impact on the dynamics of other key business indicators that characterise the enterprise’s business.Two approaches for studying and evaluating of enterprise’s rate of return as a resultative indicator exist in the theory and practice of business analysis. These are the accounting and the financial approach.The accounting approach is based on the use of profit to calculate enterprise’s rate of return. By means of this approach, the profit is compared to different bases that may be as follows, depending on the determined objectives and tasks and on the needs of information of the enterprise’s management: assets, capital, equity, expenses, revenue, etc. Furthermore, different values of profit may be also used – accounting profit, book profit, profit from principal activity, profit from sales, etc.The financial approach for analysis of business efficiency is based on the added value for capital owners.The object studied in this publication is the rate of return calculated as a percentage ratio of the book value to the average amount of enterprise’s assets (accounting approach).The studied subject is the model of the economic added value, which is a kind of connection between the accounting and the financial approach for analysis and evaluation of business efficiency.This publication is aimed at presenting a model that binds the economic added value and the enterprise’s asset-based rate of return.