Abstract
The paper presents the idea of a new method of sustainable enterprise capital management. The idea is based on a principle that states that the faster an enterprise achieves and maintains a balance between its capitals, the more effective the management is. The concept forms a part of the search for an alternative to net profit, which is a basic but outdated measure in modern times. After the introduction, the author outlines the basic principles and foundations of the new method. After introducing the principles and assumptions of the new idea, the author, in his paper, describes the studies that aimed at a practical checking of the possibilities of measuring the effectiveness of the company’s economic condition and the effects of management in accordance with the new principles. They were carried out in one of the food industry companies, whose shares are listed on the Warsaw Stock Exchange. Two new economic indicators were used in the study. The general conclusion of the study is as follows: new principles of sustainable capital management can be applied in practice to measure the effectiveness of the enterprise and the work of the management board, but there are still many conditions and problems listed in the paper that should be the subject of further work. The issue that still needs a lot of research within the whole idea is the problem of valuing the current and optimal level of corporate capital. The conclusions outline the strengths and weaknesses of the new method.
Highlights
An analysis of subject-matter literature and opinions clearly indicates that theoreticians and practitioners of management are convinced that a new paradigm of measuring enterprise efficiency is needed, one that would be an alternative to profit and would treat this task as a continuous evolutionary process
The general conclusion of the study is as follows: new principles of sustainable capital management can be applied in practice to measure the effectiveness of the enterprise and the work of the management board, but there are still many conditions and problems listed in the paper that should be the subject of further work
In the second half of the last century, despite the fact that topics such as intellectual and human capital or corporate social responsibility have already emerged in social and scientific discussion, they went in the same direction as profit, i.e., maximizing or optimizing it
Summary
An analysis of subject-matter literature and opinions clearly indicates that theoreticians and practitioners of management are convinced that a new paradigm of measuring enterprise efficiency is needed, one that would be an alternative to profit and would treat this task as a continuous evolutionary process. The search for such a measure of effectiveness has been going on for several decades (Fisher and McGowan 1983; Eccles 1991; Crowther 1996). A little later, as measures of the company’s achievements, alternative to the traditional accounting profit, there were attempts to popularize the so-called economic value added (EVA), where the basis is the rate of return on investment (ROI) and the subject of measurement is the corrected enterprise value and a measure in the form of free cash flows (FCF) in which the basis is pure cash flow and the subject of measurement is the value of the enterprise (Ratnatunga 2002)
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