Absolute Profit Research Articles

Comparison of capacity expansion strategies for chemical production plants

Changing market conditions and production requirements in chemical and biochemical industry force engineers to depart from conventional plant design. Adaptability to the market demand, a reduced investment risk and a shorter time-to-market are gaining importance besides technical excellence.A reduced investment risk and an increased adaptability can be achieved by designing smaller plants and use step-wise capacity expansions. The use of modules offers the possibility to reduce the time-to-market.This work introduces an approach to determine the best expansion strategies for modular equipment-wise capacity expansions and compares its results to line-wise capacity expansion strategies and to a conventionally designed plant for a given market demand development using a detailed process simulation. In a case study, the modular equipment-wise expansion strategy offers a 30% lower initial investment risk while increasing the absolute profit up to 40%, although the overall investment increased up to 40% compared to the conventional design. Additionally, an approach to design reactor modules with a larger operating window is proposed and compared in light of an equipment-wise capacity expansion strategy. Two final key statements to exploit the full potential of an equipment-wise capacity expansion are: (a) the determination of operating windows based on process-technological and mechanical operating constraints is a necessity and (b) equipment modules need to be designed for a large operating window to offer a capacity expansion by numbering-up without a gap in the operating window.

Pairs trading strategies in a cointegration framework: back-tested on CFD and optimized by profit factor

ABSTRACTStatistical arbitrage is based on pairs trading of mean-reverting returns. We used cointegration approach and ECM-DCC-GARCH to construct 98 pairs of 152 stocks of 3 currencies. Stocks trading is done by Contract for Difference (CFD), a financial derivative product which facilitates short selling and provides a leverage up to 25 times. To measure the performance of a leveraged strategy, we introduced the profit factor which is the annualized return rate per unit risk. And the historical risk is measured by maximum drawdown. We compared three main strategies: percentage, standard deviation of cointegration long-term residuals and Bollinger Bands (dynamic standard deviation), with and without double confirmation of short-term standard deviation modelled by ECM-DCC-GARCH. Each of the three main strategies is optimized by two optimizers: absolute profit and profit factor. The optimization period goes from 2012–01-01 to 2014–12-31, and validation period is from 2015–01-01 to 2016–06-01. Our results showed that the USD Bollinger Bands strategy without double confirmation and optimized by profit factor, outperformed other strategies and provided the highest annualized return rate per unit risk; 32% of our sample pairs ended up in loss, and 94% of which are explained by a cointegration break during the testing period.

Optimal investment decision making on the model of production enterprise with limited resources

Investments are among the most important factors of national economic growth. Selection of optimal investment project is the first priority for any enterprise with limited financial resources. This study is dedicated to a choice among mutually exclusive projects, which are impossible to complete partially, so, one project must be chosen and all others must be rejected. An investor must find among all possible projects the one that allows to better achieve all investor’s aims. A mathematical model of multi-purpose multi-criteria investor decision making is proposed for investment project selection problem. Efficiency and riskiness of studied projects are evaluated using such indicators as profit, rate of return, payback period, marginal cost of capital, also taking into account subjective characteristics, namely the investor’s attitude towards financial risks, importance assessment of decision making criteria, etc. Decision making assessment methods for the situations of risk and uncertainty are applied to resolve the problem of optimal project selection, such as Wald’s pessimistic criterion, maximax optimistic criterion, as well as Hurwicz’s, Laplace’s, Bayes- Laplace, Hodges-Lehmann criteria, and Savage’s minimax risk criterion. Calculations carried out and results obtained indicate that the best investment project chosen that way will provide the highest absolute profit, despite certain disadvantages such as lower rate of return, longer payback period and higher risk than other projects.

The theoretical aspect of profit and profitability analysis

The company's profit and profitability are one of the most important criteria for assessing the enterprise performance. According to the achieved results of profit and profitability, it is being judged what benefits may receive different interest groups of the company - owners, employees, investors and creditors. All business enterprises are concerned to increase the profitability. The article analyses the theoretical aspects of profit and profitability assessment. The analysis of scientific literature of foreign and Lithuanian authors suggests that the company's profitability analysis helps to determine the financial aspects of the company's financial performance, to assess the current situation in order to make appropriate management decisions. The company's profit and profitability are one of the most important criteria for assessing the enterprise performance. According to the achieved results of profit and profitability, it is being judged what benefits may receive different interest groups of the company - owners, employees, investors and creditors. All business enterprises are concerned to increase the profitability. The article analyses the theoretical aspects of profit and profitability assessmentWhile assessing company’s activity efficiency in various aspects, its competitiveness and growth possibilities, it is not enough to analyse absolute profit indices and based on them to take particular decisions, because an absolute profit index does not reflect company’s real financial situation. More comprehensive information is obtained by calculating relative profitability indices and comparing them with profitability. Besides, profitability indices in a structured form provide to company’s managers the most important and most precise information in form of indicators based on which there is a possibility to assess company’s financial situation and to forecast company’s future financial situation, foresee activity’s success and failures. Therefore, even a profitable company needs a constant analysis of these indices, their dynamics, affecting factors, because due to affecting factors the company’s managers can assess and forecast profitability indices. In search for the ways how to increase a profit and profitability indices, it is very relevant for the company’s managers to assess introduction of new services to a market, because new implemented services reach a success, the company’s managers can take decisions, determining dynamics of development of profitability indices, and direct company’s management towards profitable direction.The article analyses the theoretical aspects of profit and profitability assessment. The analysis of scientific literature of foreign and Lithuanian authors suggests that the company's profitability analysis helps to determine the financial aspects of the company's financial performance, to assess the current situation in order to make appropriate management decisions

Patates Üretim Maliyetleri ve Karlılığındaki Değişim: Niğde İli Örneği

Niğde is one of the provinces in Turkey where potato production is carried out intensively. In this study it was aimed to examine the change in the potato production costs and profitability in Niğde province in 2000-2014 period. In Niğde the absolute profit obtained from the potato production was calculated as 355.6TL/da for 2014. Among the examined years, the year in which the highest absolute profit was 2005 with 450.8 TL/da and the lowest absolute profit was in 2012 with -329.7 TL/da. Gross production value can meet the production costs in all of the examined years except for 2012. However, with the increase in production costs, absolute and relative profits tended decrease.

Optimization of a genomic breeding program for a moderately sized dairy cattle population

Although it now standard practice to genotype thousands of female calves, genotyping of bull calves is generally limited to progeny of elite cows. In addition to genotyping costs, increasing the pool of candidate sires requires purchase, isolation, and identification of calves until selection decisions are made. We economically optimized via simulation a genomic breeding program for a population of approximately 120,000 milk-recorded cows, corresponding to the Israeli Holstein population. All 30,000 heifers and 60,000 older cows of parities 1 to 3 were potential bull dams. Animals were assumed to have genetic evaluations for a trait with heritability of 0.25 derived by an animal model evaluation of the population. Only bull calves were assumed to be genotyped. A pseudo-phenotype corresponding to each animal's genetic evaluation was generated, consisting of the animal's genetic value plus a residual with variance set to obtain the assumed reliability for each group of animals. Between 4 and 15 bulls and between 200 and 27,000 cows with the highest pseudo-phenotypes were selected as candidate bull parents. For all progeny of the founder animals, genetic values were simulated as the mean of the parental values plus a Mendelian sampling effect with variance of 0.5. A probability of 0.3 for a healthy bull calf per mating, and a genomic reliability of 0.43 were assumed. The 40 bull calves with the highest genomic evaluations were selected for general service for 1 yr. Costs included genotyping of candidate bulls and their dams, purchase of the calves from the farmers, and identification. Costs of raising culled calves were partially recovered by resale for beef. Annual costs were estimated as $10,922 + $305 × candidate bulls. Nominal profit per cow per genetic standard deviation was $106. Economic optimum with a discount rate of 5%, first returns after 4 yr, and a profit horizon of 15 yr were obtained with genotyping 1,620 to 1,750 calves for all numbers of bull sires. However, 95% of the optimal profit can be achieved with only 240 to 300 calves. The higher reliabilities achieved through addition of genomic information to the selection process contribute not only in obtaining higher genetic gain, but also in obtaining higher absolute profits. In addition, the optimal profits are obtained for a lower number of calves born in each generation. Inbreeding, as allowed within genomic selection for the Israeli herd, had virtually no effect on genetic gain or on profits, when compared with the case of exclusion of all matings that generate inbreeding. Annual response to selection ranged from 0.35 to 0.4 genetic standard deviation for 4 to 15 bull sires, as compared with 0.25 to 0.3 for a comparable half-sib design without genomic selection.

Risk aversion affects economic values of blue fox breeding scheme.

The profit and production of an average Finnish blue fox farm was simulated using a deterministic bio-economic farm model. Risk was included using Arrow-Prat absolute risk aversion coefficient and profit variance. Risk-rated economic values were calculated for pregnancy rate, litter loss, litter size, pelt size, pelt quality, pelt colour clarity, feed efficiency and eye infection. With high absolute risk aversion, economic values were lower than with low absolute risk aversion. Economic values were highest for litter loss (18.16 and 26.42 EUR), litter size (13.27 and 19.40 EUR), pregnancy (11.99 and 18.39 EUR) and eye infection (12.39 and 13.81 EUR). Sensitivity analysis showed that selection pressure for improved eye health depended strongly on proportion of culled animals among infected animals and much less on the proportion of infected animals. The economic value of feed efficiency was lower than expected (6.06 and 8.03 EUR). However, it was almost the same magnitude as pelt quality (7.30 and 7.30 EUR) and higher than the economic value of pelt size (3.37 and 5.26 EUR). Risk factors should be considered in blue fox breeding scheme because they change the relative importance of traits.

Economic analysis of dairy cattle farms in east Mediterranean region of Turkey

The purpose of this study was to calculate costs of milk production, gross production value, gross margin, absolute profit, and relative profit of dairy cattle farms located in the provinces of east Mediterranean region of Turkey. Primary data were collected from 148 dairy cattle farms designated using the Neyman Stratified Sampling method through surveys. Dairy farms were classified into four groups according to the number of cows. The data belong to the 2012 production season. A single product budget analysis method was used for calculating production costs. According to the results, variable costs amounted to 65.91% of total production costs. Feed cost (86.52%) was the main component of variable costs. The cost of 1 kg of milk, on average, was calculated as USD 0.261. The cost of milk was USD 0.499 on group 1 farms, USD 0.399 on group 2 farms, USD 0.272 on group 3 farms, and USD 0.233 on group 4 farms. Among the farms under study, average gross margin value was negative only on group 1 farm, and positive in all other groups. Absolute profit value was positive only on group 4 farm, and negative in all other groups. The average relative profit of the farms was 0.9067. The expansion of dairy farms could be reached by reducing the feed cost as well as increasing the scale of farms.

Quantifying the Agronomic and Economic Performance of Hybrid and Conventional Rice Varieties

The objective of this research is to estimate and compare the agronomic and economic performance of hybrid and conventional rice (Oryza sativa L.) varieties in the Mid‐South of the United States. The introduction of hybrid rice for commercial production has given producers an alternative to traditionally cultivated, conventional (inbred) lines. Adoption rates of hybrid rice have grown to over 40% in some regions of the Mid‐South; however, its milling quality is a concern. Producer revenues are based on both rough (paddy) rice yield and postharvest processing, or milling. Hence, producers receive prices at the mill that are directly affected by the milling quality of the delivered rice. In this study, we used 3500 observations from 2003 to 2013 with detailed weather, yield, and milling data in 23 locations across Arkansas and Mississippi to estimate differences in the paddy (quantity) and milled rice yield (quality) between hybrid and conventional cultivars. Moreover, we used a multivariate regression framework to estimate yields and economic returns for Clearfield (imidazolinone tolerant; CL) and non‐CL varieties. We found that hybrid varieties had a paddy yield premium over conventional varieties of 1.66 Mg ha−1 and 1.82 Mg ha−1 for CL varieties. The results show that hybrids had a lower milling quality than the conventional varieties, yet the milling quality exceeded industry standards in 97.5% of the observations. On average, hybrid varieties outperform conventional rice varieties in terms of absolute profit per hectare and relative profit margin, defined as profit per cost of production, for both CL and non‐CL varieties.Core Ideas Rice producers’ revenue is based on both rough rice yield and the subsequent milling outcome. Early hybrid lines had high paddy but low milling yields which questioned their economic status. We find that hybrids had a distinct paddy yield advantage over inbred lines. We find hybrids had a lower milling quality than inbred lines but exceed industry standards. We find hybrids outperform inbred varieties in absolute, profit ha−1 and relative profit margin.

Proactive Communication of CSR in India

While much has been written about the communication of corporate social responsibility (CSR), relatively less is known about the pattern of communication of CSR information. Motivated by this gap in the literature, we investigate the pattern of communication of CSR information among the private sector companies in India, as reflected in the corporate websites taking absolute profit as the parameter and show that the corporate sector in India is yet to fully recognize the value of open communication about CSR practices to meet the needs of an increasingly transparent marketplace and to help build corporate reputation.

Is Corporate Social Responsibility in India Still in a Confused State?— A Study of the Participation of the Private Sector Companies of India in Corporate Social Responsibility Activities

This article aims to explore the establishment of a pattern of participation of corporate social responsibility (CSR) activities amongst private sector companies as reflected in the respective company documents in the public domain, taking absolute profit as the parameter. An empirical and analytical study was undertaken whereby the corporate official websites of the companies were analyzed for the time period 2006–2007 to 2008–2009. Data were then generated from such an analysis using qualitative document analysis. For this study, we used ‘number of sentences’ as the unit for measurement of CSR participation. Descriptive statistics, Pearson’s correlation, multiple regression analysis and conjoint analysis were used to analyze the data. The study showed that the most preferred CSR activities were education, health and environment. Drinking water and sanitation and urban upliftment were the least preferred activities. A high level of dispersion was observed with respect to the least preferred activities; and a low level of dispersion was observed with the most preferred activities. Significant correlation was observed with respect to various CSR activities that the companies were responsive to. The activities which had a significant impact on the companies divided into deciles, at different levels, as per the multiple regression analysis were: education, health, environment, employability, rural upliftment, others and empowerment. Companies belonging to the manufacturing sector and the diversified sector have shown the highest responsiveness towards such activities. Companies have attached the highest importance (Level 1) to the following CSR activities: education, environment, health, rural upliftment and others.

Economics and Financial Adjustments in Europe

This paper examines the endogenous choice problem of each firm's price or quantity contract in a mixed duopoly composed of one social welfare maximizing public firm and one relative profit-maximizing private firm. In this paper, we show that unless the degree of product differentiation and the degree of importance of the private firm's relative performance are low, the quantity competition can analytically become the unique equilibrium market structure on the basis of the dominant strategies of the public firm and the private firm when the degree of importance of firm 1's relative performance is sufficiently high. This result contrasts strikingly with that obtained in a standard mixed duopoly composed of one social welfare-maximizing public firm and one absolute profit maximizing private firm. In addition, even in the area wherein both the degree of product differentiation and the degree of the private firm's relative performance are sufficiently low, through numerical simulations, the quantity competition tends to become the unique equilibrium market structure when the degree of importance of the private firm's relative performance is sufficiently high, whereas the price competition tends to become the unique equilibrium market structure when the degree of importance of the private firm's relative performance is sufficiently low.

Bioetik çerçevede çevre politikaları

Up to now, researches have been generated indicate the reality about environmental biopolitics are the safeguard of lives of the people who are living and the next generations. In this Article, the reality which is about the economic policies that were developed to increase absolute profit, encourage excess consumption and production and so impend sustainability of natural resources and World’s peace as well, were underlined. In this Article, economical effectiveness is re-defined, free market dynamics such as externalities, public welfare, tragedy of commons are evaluated under the framework of environmental, economical and social dimensions of Sustainable Development specifically. On the other hand, the concept of Green Economy which is accepted as an important tool regarding to determine the limit in between “Production” and “Nature” and provide supports to human being to cope dilemma to be faced with, is evaluated as well.

Relative Profit Maximization and Bertrand Equilibrium with Convex Cost Functions

Abstract This study derives pure strategy Bertrand equilibria in a duopoly in which two firms produce a homogeneous good with convex cost functions and seek to maximize the weighted sum of their absolute and relative profits. The study shows that there exists a range of equilibrium prices in duopolistic equilibria. This range of equilibrium prices is narrower and lower than the range of equilibrium prices in duopolistic equilibria under pure absolute profit maximization. Moreover, the larger the weight on the relative profit, the narrower and lower the range of equilibrium prices. In this sense, relative profit maximization is more aggressive than absolute profit maximization.

Endogenous choice of strategic incentives in a mixed duopoly with a new managerial delegation contract for the public firm

This paper revisits the endogenous choice problem of the strategic contracts in a mixed duopoly of one public firm and one managerial private firm, with differentiated goods. This paper considers the situation wherein the separation between ownership and management exists in both the public firm and the private firm. In particular, we focus on a new type of managerial delegation contract in the public firm that is a weighted sum of social welfare and the difference between consumer surplus and producer surplus (sum of each firm's absolute profit). On the other hand, in this paper, the classical sales delegation contract is employed in the private firm. In the above setting, we show that similar to the case wherein both the public firm and the private firm simultaneously use their sales delegation contracts, there does not exist any equilibrium market structure under the class of pure strategies of both the firms. Thus, even if the government as the owner of the public firm provides to her/his manager a strategic delegation contract such that it is easier to manipulate social welfare, we find that it is likely that the indeterminacy in the equilibrium market structure(s) under the class of pure strategies cannot be resolved. Therefore, in this paper, we conclude that the government must devise another style of managerial delegation contract of the public firm in order to assure the equilibrium market structure under the pure strategy class.

Price versus quantity in a mixed duopoly: The case of relative profit maximization

This paper examines the endogenous choice problem of each firm's price or quantity contract in a mixed duopoly composed of one social welfare maximizing public firm and one relative profit-maximizing private firm. In this paper, we show that unless the degree of product differentiation and the degree of importance of the private firm's relative performance are low, the quantity competition can analytically become the unique equilibrium market structure on the basis of the dominant strategies of the public firm and the private firm when the degree of importance of firm 1's relative performance is sufficiently high. This result contrasts strikingly with that obtained in a standard mixed duopoly composed of one social welfare-maximizing public firm and one absolute profit maximizing private firm. In addition, even in the area wherein both the degree of product differentiation and the degree of the private firm's relative performance are sufficiently low, through numerical simulations, the quantity competition tends to become the unique equilibrium market structure when the degree of importance of the private firm's relative performance is sufficiently high, whereas the price competition tends to become the unique equilibrium market structure when the degree of importance of the private firm's relative performance is sufficiently low.

Capacity choice in a duopoly with a consumer-friendly firm and an absolute profit-maximizing firm

This paper studies a capacity choice problem in a duopoly with substitutable goods that is composed of one consumer-friendly firm and one standard absolute profit-maximizing firm in the contexts of both quantity competition and price competition with substitutable goods. In this paper, we assume that the consumer-friendly firm maximizes the weighted sum of its absolute profit and consumer surplus. We show that in the quantity competition, for the consumer-friendly firm, under-capacity is chosen when the extent of the importance of consumer surplus to the consumer-friendly firm is high relative to the degree of product differentiation, whereas over-capacity is chosen otherwise. Moreover, we find that in the price competition, the consumer-friendly firm chooses over-capacity when the extent of importance of consumer surplus to the consumer-friendly firm is high relative to the degree of product differentiation, whereas it chooses under-capacity otherwise. Furthermore, regardless of the extent of the importance of consumer surplus to the consumer-friendly firm and the degree of product differentiation, it is shown that in the quantity competition, the absolute profit-maximizing firm chooses over-capacity, whereas in the price competition, it chooses under-capacity.

A practical approach to selecting optimal control criteria

The studies of the techological processes (TP), process operations (PO) of which have equal cost estimates of input products are conducted. Herewith, time and monetary evaluations of output products for process operations of various technological processes are different. The approach to selecting process operation enables to compare the cumulative growth of the TP value added within the time interval being investigated. Carrying out studies with the use of this methodology allows comparing the TP, and accordingly the PO (because the PO are equivalent to the TP) with reliance on the absolute indicator profit (value added). As a result of the studies, it was found that the maximum value added (profit) is provided, the TP operations of which have the maximum efficiency. The established fact allows to consider the index of effectiveness as a single optimal control criterion.

Biased managers as strategic commitment: The relative profit approach

This paper analyzes a duopolistic model wherein each firm׳s owner can hire a biased manager for strategic reasons. We focus on the situation wherein each firm׳s owner evaluates the performance of her/his manager on the basis of her/his relative profit, which is equal to the weighted sum of her/his absolute profit and the absolute profit of her/his opponent firm. We show that in both price-setting and quantity-setting competitions, the owners of the two private firms employ aggressive managers rather than absolute profit maximizing managers regardless of the degree of importance of each firm׳s relative performance. Furthermore, in both the price competition and the quantity competition, as the degree of importance of each firm׳s relative performance increases, we show that the firms׳ owners tend to hire more aggressive managers when the degree of importance of each firm׳s relative performance is sufficiently low, whereas in both the price competition and the quantity competition, the firms׳ owners tend to hire less aggressive managers otherwise. Thus, in both the price competition and the quantity competition, the type of each firm׳s manager is not monotone with respect to the degree of each firm׳s relative performance. Thus, in both the price competition and the quantity competition, we find that the change in the optimal type of manager hired by each firm is non-monotone against the change of competitiveness in the market with the increase in the degree of importance of each firm׳s relative performance.

Relative profit maximization and Bertrand equilibrium with quadratic cost functions

We study the Bertrand equilibrium in duopoly in which two firms produce a homogeneous good under quadratic cost functions, and they seek to maximize the weighted sum of their absolute and relative profits. We show that there exists a range of the equilibrium prices in duopolistic equilibria. This range of equilibrium prices is narrower and lower than the range of the equilibrium prices in duopolistic equilibria under pure absolute profit maximization, and the larger the weight on the relative profit, the narrower and lower the range of the equilibrium prices. In this sense relative profit maximization is more aggressive than absolute profit maximization.