Income & Profitability of enterprise

Those choices are not that difficult to make (although they can be difficult to execute) with respect to the two business factors we have identified. In almost every case it will be sensible to improve the organization's business capacity and to systematize it wherever possible which should improve its financial results. The choices with respect to the three trade-off factors we have identified are more difficult to make because there is no “right” answer. The most appropriate choice for any given organization will depend on its social goals and the financial constraints under which it operates. Hopefully this article has provided the framework and some tools to make those difficult choices easier to make.

We don't believe that this framework is a finished product. The factors we have identified are based on our learning from the social enterprise investments we have made over the last seven years. We expect these findings will continue to evolve and, more importantly, that other organizations in this field can help refine this model to make it more useful. Ultimately we believe we will all be better investors and operators of social enterprises if we make conscious choices with respect to the tradeoffs between the financial and social missions of the business and we finance them accordingly.

The purpose of the enterprise - is to maximize their economic profit. Competitive pressures in the market can contribute to this goal. Economic profit - is the difference between gross income and costs (explicit and implicit) for all resources used in production. Economic profit differs from accounting, which represents the difference between gross income and the explicit costs of the resources used in production.

The economic model of perfect competition assumes a standardized product, the adoption of pricing firms, full mobility of resources and complete information about customers and companies.

In conditions of perfect competition for a single firm, the value marginal revenue equals the market price, tending to maximize profits the firm optimizes its output in case of equality of market price and marginal cost of production.

Optimizing production through the choice of output at which price equals marginal cost, perfectly competitive firm in the short term to implement the proposals as long as the price for the products above or equal to minimum average variable cost of production of the firm.

In the long run, guided by the same rule, perfectly competitive firm chooses the output at which price equals long run marginal cost, and implement the proposal as long as the price for the products above or equal to the minimum long-term average cost of production.

Both the equilibrium state (long-term and short-term) are effective in the sense that the cost of resources used in the production of the last unit of production is exactly equal to the value of production for the buyer. This means that the equilibrium state exhausts all opportunities for mutually beneficial exchange. Long-term equilibrium has special features:

1) products produced at the lowest possible cost per unit;

2) the seller pays only the costs of production.

No economic profit in doing so he does not learn. Effects of competition in the acquisition of production factors unusually high quality raises the price per unit of such factors as long as the firm that uses them do not cease to receive an economic benefit. This is an important element of long-term process control and failure, manifested in solving this issue is the cause of the bankruptcy of many firms.

Even firms that prices should actively seek ways to reduce production costs: the earlier implemented innovations that reduce costs, the greater the economic profit will be entrepreneurs.

LIST OF USED LITERATURE

1. Economic theory, Chepurina M.N., Kiseleva E.A. -Kirov:ACA2003

2. Microeconomics, Nuriyev R.M. - Moscow: Norma, 2005.

3. Frank R.H. Microeconomics and behavior - INFA,2000

4. The Business Enterprise: Theory of the Firm

5. Social Capital Partners , November 2009

6. www.socialcapitalpartners.ca/

7. www.britannicaencyclopedya.com/

Размещено на Allbest.ru