Measuring efficiency

Question 1

What is efficiency

Answer 1

How well a business uses it’s resources

Shown through unit costs

How effectively a company generates products and services related to the amount of time and money needed to produce them

Question 2

Ways to measure

Answer 2

Capacity utilisation
- good use of machines

Reduced waste
- how= train staff, quality assurance
- better use of resources

Increasing productivity
- if same number of employees now producing more units of output in same time (lowers unit costs)

JIT stock
- reduce waste by having as little stock as necessary

Automatism
- cheaper and faster than humans

Time based management
- reduce wasted time in production
- compete by getting product on the market the fastest

Question 3

Efficiency ratios

Answer 3

Payable and Receivable = how efficient you are with your money

Inventory turnover