PRODUCTIVITY ACCOUNTING AND BUSINESS FINANCIAL PERFORMANCE: A REVIEW OF CURRENT EVIDENCE

Abstract

1. IntroductionMuch of what is grasped about the link between productivity and business financial performance derives from business accounts. At the firm level, enhancements in productivity go directly to the ultimate result, to the advantage of diverse beneficiaries. Lucrative firms develop, and their employment and investment undertakings are instrumental in growth in the economy. At the economy level, such output gains increase returns per person and are instrumental in a superior standard of living. (Grifell-Tatje and Knox Lovell, 2015)2. Productivity Accounting Based on Production PricesThe relevance of productivity accounting resides in its capacity to disjoin the effects of output change and price alteration on business financial performance. Merely contrasting nominal revenue and cost via time obscures the likelihood that a somewhat profitable firm is financially ineffective as it is deficient in pricing power, or that a rather unprofitable firm is financially effective as it benefits from pricing power. Explaining price alteration transforms the analogy to one between real returns and real expenses, and thus clarifying the effect of output change on one in financial performance. Productivity accounting supplies the information and an analytical scheme within which economic investigation may determine the contributions of the main determinants of output change. Measures of output can be incorporated into business accounts, and value alterations can be separated (Mircica, 2011a, b; 2012; 2014) into quantity ones and price ones. The difficult task is to organize accounting data in an organizationally practical manner. The latter are nominal values that comprise the consequences of quantity alterations and price ones. Prices should not be disjoined from quantities if the only aim is to assess profit(ability). Measures of returns and expenses are demanded, which are immediately accessible in firm's financial statements (Popescu and Bițoiu, 2017) and which do not necessitate disjunction of values (Nica and Hurjui, 2016) into quantities and prices. At the economy-wide level (Popescu and Ciurlau, 2017), accounting convention parallels returns and expenses, interest moving from an emphasis on profit (Popescu, 2017a, b) at the business level to one on output. (Grifell-Tatje and Knox Lovell, 2015) (Figures 1 and 2)3. Productivity Measurement and Management AccountingThe assessment of output demands disjunction of distinct values (Mihaila et al., 2016) into quantities and prices that should be gathered into indexes/ indicators of output and input quantities and prices (Nica and Mirica (Dumitrescu, 2017a, b), after which output is assessed as the proportionality of an output quantity index/indicator to an input quantity index/indicator. In the aggregate accounts, the basic accounting individuality necessitates nominal returns to correspond to nominal expenses that comprises gross operating surplus/gross return to capital, which supplies compensation for the providers of capital inputs, eliminating the difference between nominal returns and nominal noncapital expenditures by considering compensation for capital inputs as an expenditure (it is conveyed as a value that cannot without difficulty be divided into quantity and price elements). …