Describe How Value-Added Is Calculated. to What Extent Are Value Added, Cashflow, and Profit Connected to a Company’s Sales Performance? Discuss Using an Extended Examples.
Describe how value-added is calculated. To what extent are value added, cashflow, and profit connected to a company’s sales performance? Discuss using an extended examples.
According to Gilchrist (Gilchrist, 1971) the value-added is a notion that companies should always be focused on. It can be defined as the measure of the amount of money created by a company.
In economics and business languages, it is a term increasingly and wildly used in economic press or in politic speeches for example, especially in European countries concerned about their growth rate needed to maintain their level of living.
Somewhat, when we speak about value-added, it is inevitable to address the critical question of labour costs which makes developed countries less competitive than emerging countries. For example, the idea of a social VAT takes its place here within political programmes designed to reduce the labour costs lying on companies.
On one hand, we will describe the several ways to calculate the value added of a company, firstly with the subtractive and the additive perspectives and secondly with the traditional accounting calculation used by most economists. We will also explain how the value added of a country is calculated.
On the second hand, we will use the value added framework to try to establish a connection between the value-added, the cashflow and profit in one side, and the company’s sales performance in the other side.
To illustrate the point, the examples of Hermes and Nike will be taken throughout this paper.
On one hand, we will consider the company’s value-added. According to Cox (Cox, 1979), there are four constituents of the value-added for a company. Indeed, the deduction of the purchases of materials and services from the gross output (total sales revenue) gives the value-added. Once calculated the value added has to be distributed between wages, depreciation and operating profit. From this analyze, Cox assumes that it is possible to consider two
According to Gilchrist (Gilchrist, 1971) the value-added is a notion that companies should always be focused on. It can be defined as the measure of the amount of money created by a company.
In economics and business languages, it is a term increasingly and wildly used in economic press or in politic speeches for example, especially in European countries concerned about their growth rate needed to maintain their level of living.
Somewhat, when we speak about value-added, it is inevitable to address the critical question of labour costs which makes developed countries less competitive than emerging countries. For example, the idea of a social VAT takes its place here within political programmes designed to reduce the labour costs lying on companies.
On one hand, we will describe the several ways to calculate the value added of a company, firstly with the subtractive and the additive perspectives and secondly with the traditional accounting calculation used by most economists. We will also explain how the value added of a country is calculated.
On the second hand, we will use the value added framework to try to establish a connection between the value-added, the cashflow and profit in one side, and the company’s sales performance in the other side.
To illustrate the point, the examples of Hermes and Nike will be taken throughout this paper.
On one hand, we will consider the company’s value-added. According to Cox (Cox, 1979), there are four constituents of the value-added for a company. Indeed, the deduction of the purchases of materials and services from the gross output (total sales revenue) gives the value-added. Once calculated the value added has to be distributed between wages, depreciation and operating profit. From this analyze, Cox assumes that it is possible to consider two
Bibliography: Cox, B. (1979)Value Added, London: Heinemann. Dodge, R. (1997) Foundations of Business Accounting, Thomson Business Press. Gilchrist, R.R (1971) Managing for profit: The Value Added Concept, London: George Allen. Gratlon, C. and Taylor, P. (2000) Economies of sport and recreation, Taylor and Francis. Kay, J. (1993) Foundations of Corporate Success , Oxford: OUP.