ABOUT THE ANALYSIS OF THE RATE OF RETURN OF ENTERPRISE’S ASSETS AND EQUITY
Authors: Ivanova Rositsa 
Published: December 2021

The issue of enterprise’s business efficiency is topical at all phases and stages of its development. Efficiency is a key concept in economy. Efficiency indicators are relative values which help to commensurate the achieved results and the resources used by the enterprise for their achievement.Efficiency should be analyzed and evaluated in two interrelated aspects. We speak about efficiency in its capacity of resultative indicator that characterizes the enterprise’s operations. The first aspect of efficiency shows the ratio between the value of the result achieved from operations per resource input of BGN 1, and the second one – the amount of resource input for the achievement of enterprise’s result from operations of BGN 1.Depending on the absolute values used for the calculations of the efficiency indicators, they can be classified as follows: indicators for efficiency of use of resources; indicators for efficiency of income and costs; indicators for rate of return.The system of indicators for analysis and evaluation of the efficiency of use of resources may comprise the following indicators. The coefficients of fixed tangible asset workload and absorptiveness are used for analysis and evaluation of the efficiency of use of production fixed capital. The efficiency of use of material resources (part of the production working capital) is analyzed and evaluated by means of the coefficients of material input and material output, and the indicator for analysis and evaluation of the efficiency of use of manpower is the efficiency of labor.The coefficients for efficiency of income and efficiency of costs are used for analysis and evaluation of the efficiency of income and costs. An objective relation exists between these two coefficients and the net income-based and cost-based rate of return, which is of crucial practical and applied significance and provides the enterprise’s management with useful information.Rate of return is a summarizing indicator that characterizes the enterprise’s operations. The level of rate of return may be identified on varied bases: assets, capital, equity, fixed capital, income, cost, etc.Efficiency of enterprise’s operations can be analyzed and evaluated by using different analysis approaches and models. These are the accounting (traditional) approach based on the accounting information, the financial approach based on the quantitative business assessment, and the management approach based on the mission, vision and strategy of the enterprise.This publication reviews the enterprise’s rate of return, and its subject matter covers the rate of return of enterprises’ assets and equity.Our purpose is to demonstrate the significance and importance of the rate of return of enterprise’s assets and the methodology of its analysis. To prove the benefits of the analysis of asset rate of return for the economic practice, i.e. the benefits of the accounting approach for analysis and evaluation of business efficiency. We are trying to demonstrate that the use of the indicator for equity rate of return only, while ignoring the rate of return of assets, is improper, inexpedient, misses’ logics and does not provide the financial management with sufficient information for making proper and reasonable decision for the management of the enterprise and its business. This is explained by the fact that the analysis of the rate of return of the enterprise’s equity does not provide information about the efficiency of use and management of assets in which owner’s capital is input.