Everything has a price


Today’s realities are increasingly engaging people to talk about money – about our private, home-based budgets and also about large investments at global level. It is impossible not to notice the fact that care for finances has resulted in the development of innovative methods for their analysis. Starting from simple applications that allow us to monitor daily expenses, ending with huge accounting and bookkeeping systems that support global corporations. Conversations about money also affect broadly defined investments. Very often they are connected with implementations of modern technologies, which are supposed to bring even greater benefits, with the final result of even higher profit. How can we define a profit? And is it really the most important factor in today’s perception of business? How is the company’s activity in the area of ​​innovation functioning in all of this?


What is a profit?


Referring to the literature, we can read that “profit is the surplus of revenues over costs”[1]. In other words, profit is a positive financial result. Speaking colloquially, it is a state in which we earn more than we spend. And of course this is definitely a desirable phenomenon, because the company should make a profit as intended. It is a basis for further investments which would allow to constantly meet the needs of customers. Speaking of profit, we can distinguish several of its types[2]:

  1. Gross profit, ie the difference between net revenues from sales and the costs of sold products. Thanks to it, we can see how the unit of our production translates into the financial result. This particularly is important for manufactories, which often look for such improvements, that will allow them to preserve the effect of scale.
  2. Net profit, ie the surplus that remains after deducting all the costs. In balance sheet, this is the difference between total costs and sales revenue. Very often in today’s world it is understood as a factor that testifies to the good financial condition of the company.
  3. Operating income, a specific type of profit, which focuses only on the result in the area of ​​the company’s core business. Very often included in the profit and loss account in the form of EBIT (Earnings Before Interest and Taxes).

Profit&Productivity


Good and efficient production is a basis for gaining profits as well as an optimized system that meets the expected assumptions related to production efficiency. Efficiency however, depends largely on human work. Very often, it is the man who becomes the least efficient element of the whole system. What are the reasons? Uncomfortable working conditions, lack of self-development prospects, monotony and quiet consent to actions such as “earn by doing bare minimum” – all those lead to a person who ceases to be efficient. And while human thinking can not be changed overnight, working conditions are at the discretion of the employer. Those who are more aware, show that the employee in the centre of production system and that human is necessary for its correct functioning. The simple conclusion is that an employee whose job position does not bother him, what’s more, it suits his needs, will be much more efficient at work than someone who thinks all the day about quitting his job because his work status is miserable. Happy employee will be able to work much longer and more efficiently, improving his experience and allowing production to increase. In the case of the effect of scale, such move can cause a significant increase in profitability (not necessarily associated with money).


Factors which directly affect performance


Efficiency in this sense is connected with being able to guarantee that work will not harm the life or health of employees. The general classification of the Central Institute for Labor Protection lists factors such as[3]:

  • noise and mechanical vibrations,
  • mechanical factors,
  • chemical factors and dust,
  • muscle and skeletal overloads,
  • stress,
  • lighting,
  • optical radiation,
  • electrical current.

This classification also lists thermal burden, electromagnetic field, biological factors and explosion and fire risks. However, the most common problem is the issue of noise and vibrations, which can not always be detected by human ear. Very often, as a result of being in a noisy environment drowsiness level is increased and that has a negative impact on human concentration. Thus, we can conclude that even something as inconspicuous as a noise and vibrations generate huge costs for the entrepreneur, especially when it comes to the unit costs (in mass production case).


How to avoid generating costs?


Companies from the R&D industry, engineers and specialists are thoroughly studying and improving production systems, offering solutions that eliminate even the most difficult problems concerning the efficiency of human work. The awareness of better care over the employee has deepened over years. Today, we can see this phenomenon for solutions in the field of artificial intelligence and systems that will simplify human work in the future. However, solutions like these are quite a big investment, so financial engineers are trying to optimize costs.


We invite you on the 31st of January for the second part of the article “Financial aspects of implementation of the Active Noise Reduction System” which will bring the practical aspect of the issue closer.

Sources:

  • 1. D.Begg, G.Vernasca, S.Fischer „Mikroekonomia” PWE Warszawa 2011
  • 2. mfiles.pl/pl/index.php/Zysk „Encyklopedia Zarządzania”
  • 3.ciop.pl/CIOPPortalWAR/appmanager/ciop/pl?_nfpb=true&_pageLabel=P1401037871334841682883,