The business activity of a business entity is reflected financially in the rate of turnover of its funds. At the same time, profitability reflects the level of profitability of the activity of this subject.
Analysis of business activity of an enterprise is a study of the dynamics and levels of various ratios and profitability, as well as turnover. These indicators are relative totals of the financial results of the company.
A study of business activity can identify the degree to which the enterprise uses funds. As mentioned above, business activity operates with indicators such as profitability and turnover ratios. They have a significant impact on evaluating the performance of the company. For example, working capital is circulated once a quarter if there is a 25% return on core business. Then the business activity index for the same quarter will be 0.25 (the same 25%). From this we can formulate the following conclusion: if, with a similar profitability, the turnover of a given working capital doubles, then business activity also doubles.
Similar conclusions are made on the issue of reducing or increasing profitability. In other words, with a slowdown in turnover, it is necessary to compensate for its greater profitability. And if it is impossible to increase profitability, then this process needs to be regulated by turnover, i.e. increase production and sales.
Business activity is a dynamic and comprehensive characteristic of entrepreneurial activity, as well as an assessment of the effectiveness of the use of resources available to a business entity. The levels of this indicator reflect the stages of the company’s functioning, consisting in considering the origin, development, rise, decline and crisis, and also show the level of adaptation to changing market conditions and the quality of management.
Business activity can be characterized by a motivated managerial macro or micro level in the process of stable economic activity of the organization, which is aimed at ensuring the growth of employment and the efficient use of resources in order to achieve market competitiveness.
Using the index of business activity, the effectiveness of the use of labor, material, financial and other resources in all areas of activity is expressed, as well as the quality of management, the adequacy of the company's capital and the possibility of economic growth.
An important influence on the indicator under consideration is exerted by macroeconomic factors, the impact of which contributes to the formation of either a favorable climate that stimulates the conditions for the active conduct of a business entity or becomes a prerequisite for curtailing business activity.