ISSN:
2181-3906
2023
International scientific journal
«MODERN SCIENCE АND RESEARCH»
VOLUME 2 / ISSUE 11 / UIF:8.2 / MODERNSCIENCE.UZ
835
FINANCIAL INDICATORS OF BUSINESS EFFICIENCY IN COMPANIES
Khalilov Bahromjon Bahodirovich
Asia International University, Bukhara
Lecturer of department of Economics
https://doi.org/10.5281/zenodo.10203907
Abstract.
This article provides information on business performance indicators of the
enterprise. Recommendations are also given to achieve efficiency in business.
Key words:
business, financial, investments, economic, companies.
ФИНАНСОВЫЕ ПОКАЗАТЕЛИ ЭФФЕКТИВНОСТИ БИЗНЕСА В
КОМПАНИЯХ
Аннотация.
В данной статье представлена информация о показателях
эффективности бизнеса предприятия. Также даны рекомендации по достижению
эффективности в бизнесе.
Ключевые слова:
бизнес, финансовый, инвестиции, экономический, компании.
Business organizations exist within the context of larger market economies where
conditions are always changing. For an organization to survive in the face of this constant change,
analytical scientists recommend an organizational strategy of flexibility. They advocate a strategic
resilience, which is achievable when managers anticipate and adjust to changes that threaten a
company’s core competencies. However, their suggestions for developing strategic resilience
contain little guidance for incorporating financial decisions in the organization’s strategic
deliberations.
An initial step for financial analysis is the quantitative evaluation of a firm’s investment
opportunities. But special care is required here. The traditional Net Present Value (NPV)
computations, first made popular by Dean, assume that once an investment is made, a manager
cannot revise the initial commitment of resources in order to change future cash flows. These
methods are still taught today, but they ignore flexibility. Many investments are not passive
investments that are unchangeable once committed.
Managers can and do act after initial investment commitments have been made to adjust
the size and nature of cash flows when past assumptions about future conditions prove incorrect.
To reflect the market value of such potential adjustments, Real Option Theory moves away from
NPV’s assumption of a passive manager who no longer acts once an investment decision is made,
to that of active management that permits managers to enact changes in resource commitments
after initial investment is made. In this new view, total NPV of an investment opportunity is seen
as a sum of two components:
1. The NPV with no revisions, plus 2. The NPV that is associated with possible revisions
in commitments. Real Option Theory offers financial assessment of the flexibility that facilitates
a company’s strategic resilience capabilities. It provides a method to quantify the value of
managerial flexibility so that a manager’s real options can become part of NPV analyses. This
approach can be used for several different purposes. In any of its investment-decision applications,
Real Option Theory reflects the reality that managers are not passive, but are able to actively adjust
ISSN:
2181-3906
2023
International scientific journal
«MODERN SCIENCE АND RESEARCH»
VOLUME 2 / ISSUE 11 / UIF:8.2 / MODERNSCIENCE.UZ
836
company operations as unforeseeable future conditions unfold. Real Options Theory is not always
as simple to use as computation-guided approaches, such as traditional NPV.
It invites subjective judgments as to what could happen instead of focusing only on what
is most likely to happen. Think, for example, of putting only enough gasoline in an automobile to
safely make a scheduled trip of 100 miles. A traditional NPV approach buys the minimum amount
of gasoline because less gasoline reduces investment cost without jeopardizing the scheduled trip.
Conversely, Real Options Theory leads management to consider the value of putting an extra
amount of gasoline in the automobile—based on the probability that an unanticipated but
potentially profitable side trip should be taken during the originally scheduled 100-mile trip. In
other words, investing for just the scheduled 100-mile trip does not allow the flexibility to seize
an attractive—but unexpected—opportunity. The value of this flexibility involves managerial
judgments. The same holds true in evaluating a threat, such as getting a flat tire—would you make
this trip without a spare tire? A strictly profit-maximizing approach may seek to reduce costs by
recommending against purchasing a spare tire. What is the value of having a spare tire? This is the
kind of judgment decision overlooked by traditional NPV calculations.
A company might invest in a power plant that can switch between natural gas and wood
fiber in generating electricity so that future power needs can be satisfied by whichever method is
cheaper. The initial cost of this switching flexibility might be high and so traditional capital
budgeting calculations might favor low-cost, less flexible alternatives. But, if the other side of low-
cost is an inability to cope with volatile fuel prices, then traditional methods give the wrong
answer. Real Option Theory is a better tool, one that values flexibility, and its proper application
will serve managers who desire to make their organizations more resilient to economic stress.
Strategic resilience comes at a cost, and managers may quickly find that its development
places constraints on profits. Much like with other core competencies or “competitive advantages”
of a company, resilience requires an investment to develop and maintain. Core competencies lead
to a company’s success in its markets, and benchmarking against the competencies of competitors
may mandate larger investments just to remain competitive.
Even when financial analyses indicate that investments into certain core competencies are
not fiscally prudent, managers may choose to make these investments because of strategic goals,
such as staying at the forefront of some relevant technology. Every company needs to ask itself
what level of financial resources should be held in reserve? Different levels will be appropriate for
different companies, and resilience may affect profits in different ways. The costs of developing
resilience may reduce profits; however, resilience contributes to continued company survival.
Choosing a specific level of a company’s strategic resilience requires periodic judgments that
balance its value against its costs. Such judgments are further complicated by situations where
resilience may actually increase profits by allowing a company to seize unexpected opportunities.
When performing financial analyses, managers need to consider how all of the company’s
competencies can assist in their efforts. For example, a company may have a “captive buyer” for
whom the company is the only possible source for its vital inputs. This kind of company could
potentially pass cost increases along to its customers, thereby using its “marketing competency”
to maintain financial resilience. Alternatively, for a company that cannot pass its cost increases
along to customers, hedging may be desirable. Hedging may reduce the future profits of a
ISSN:
2181-3906
2023
International scientific journal
«MODERN SCIENCE АND RESEARCH»
VOLUME 2 / ISSUE 11 / UIF:8.2 / MODERNSCIENCE.UZ
837
company, but it can allow this company to offer stable prices to customers at a profit for the long-
term. Some companies have customers that expect stable prices, while others have customers that
accept price fluctuations.
For example, a coffee shop may hedge its purchases of coffee because its patrons expect to
pay customary prices for standard sized cups. Conversely, a gasoline station operator might not
hedge gasoline purchases because customers are used to paying fluctuating gasoline prices. The
key is to leverage your strengths against economic uncertainty. Each company will need to assess
its core competencies and strategize as to how they can be best utilized in developing the ultimate
core competency of resilience.
As a company selects investments, decisions regarding financing needs and capital
structure can affect company resilience, and therefore require strategic consideration. For example,
resilience will decrease as financial leverage increases, because large debts impose cash-flow
burdens that reduce flexibility. This is especially troublesome for small businesses because of their
tendency to rely on debt financing. There are other aspects of capital structuring that are often
considered, but managers of firms large and small should always remember that companies can
increase their resilience by reinvesting profits back into the firm. Such equity can be used to grow
the firm or to pay back borrowed money. Internal financing of growth avoids the possibility of
immense debt burdens arising when a new “star” product’s sales grow rapidly. Large debts can
develop because a company must usually pay for its production and distribution costs before the
product can be purchased by customers. Customers may make matters worse if they further delay
payment for their credit purchases. Rather than acquire a huge debt burden for financing a high-
potential product’s growth, a small company may make a strategic decision to sell the star product
to a larger company that can more safely handle the financing.
In conclusion, any organization that possesses a core competency can succeed during times
of economic prosperity. Only those that are resilient can survive economic change. Flexible
organizations are able to adjust to economic fluctuations while keeping these core competencies
intact. This flexibility must extend to the company’s capital investment policy. Managers who
employ Real Option Theory can evaluate capital investment opportunities in terms of their
flexibility, favoring capital commitments that do not put the future of the organization in jeopardy.
This approach, followed by the aforementioned steps, will help optimize a company’s resilience
through its financial decision-making processes. Traditional capital budgeting methods will not
help managers to do this work.
REFERENCES
1. Kayumovich, K. O., Annamuradovna, F. S., Kamalovna, S. F., Bahodirovich, K. B., &
Kudratovna, F. S. (2020). Directions for improvement digital tourism and tourism info
structure in Uzbekistan. Journal of Critical Reviews, 7(5), 366-369.
2. Халилов, Б. Б., & Курбанов, Ф. Г. (2020). Важность подготовки кадров в
экономике. Вопросы науки и образования, (6 (90)), 12-14.
3. Bakhodirovich, K. B. (2023). International accounting models and their characteristics
in the conditions of innovative economy. Zien Journal of Social Sciences and
Humanities, 21, 56-60.
ISSN:
2181-3906
2023
International scientific journal
«MODERN SCIENCE АND RESEARCH»
VOLUME 2 / ISSUE 11 / UIF:8.2 / MODERNSCIENCE.UZ
838
4. Bakhodirovich, K. B. (2023). CONCEPTUAL FOUNDATIONS OF IMPROVING
ACCOUNTING IN SMALL BUSINESS AND PRIVATE ENTREPRENEURSHIP.
IMRAS, 6(6), 161-165.
5. Khudoynazarovich, S. A. (2022). FEATURES OF EVALUATING THE
EFFECTIVENESS OF ACTIVITIES AT THE BUKHARA STATE UNIVERSITY.
Galaxy International Interdisciplinary Research Journal, 10(11), 153-159.
6. Khudoynazarovich, S. A. (2021). An Opportunity of Internet Marketing in Tourism
Sphere. International Journal on Economics, Finance and Sustainable Development,
3(3), 356-361.
7. Shadiyev, A. (2022). FEATURES OF EVALUATING THE EFFECTIVENESS OF
ACTIVITIES AT THE BUKHARA STATE UNIVERSITY. ЦЕНТР НАУЧНЫХ
ПУБЛИКАЦИЙ (buxdu. uz), 23(23).
8. Бозорова, М. С. (2021). ГЛАВА 10. СТРАТЕГИЯ ВНЕДРЕНИЯ ЦИФРОВЫХ
ТЕХНОЛОГИЙ И СОВРЕМЕННЫХ МЕТОДОВ В ОБРАЗОВАТЕЛЬНЫЙ
ПРОЦЕСС. In Инновационное развитие науки и образования (pp. 122-132).
9. Базарова, М. С. (2021). ЭКОНОМИКА РЕСПУБЛИКИ УЗБЕКИСТАН И РОЛЬ
ИНОСТРАННЫХ ИНВЕСТИЦИЙ В ЕЁ РАЗВИТИИ. In Современные проблемы
социально-экономических систем в условиях глобализации (pp. 350-354).
10. Mukhammedrizaevna, T. M., Bakhriddinovna, A. N., & Olimovna, R. N. TOURIST
LOGISTICS AND SUPPLY CHAIN MANAGEMENT: STRATEGIES FOR
REDUCING COST AND IMPROVING SERVICE. Zbiór artykułów naukowych
recenzowanych., 90.
11. Raxmonqulova Nafisa. (2023). XUSUSIY SHERIKCHILIK VA TURIZM KLASTERI
ORQALI HUDUDLARDA TADBIRKORLIKNI RIVOJLANTIRISH. Innovations in
Technology and Science Education, 2(8), 556–560.
12. Junaydulloevich, A. A., Bakhriddinovna, A. N., & Olimovna, R. N. Business and
Product Delivery in the Context of Covid-19. JournalNX, 1305-1307.
13. Toshov, M. (2023). PERSONNEL MANAGEMENT AND THEIR EVALUATION IN
MANAGEMENT. Modern Science and Research, 2(10), 535–541.
14. Hakimovich, T. M. (2023). IQTISODIYOTDA MENEJMENTNING AHAMIYATI.
Gospodarka i Innowacje., 41, 84-87.
15. To’rayevna, S. N. . (2023). Biznes Sohasida Xodimlarni Topish Va Tanlash Bosqichlari.
Miasto Przyszłości, 41, 184–190.
16. Sodiqova, N. (2023). DIGITAL LABOR IN THE NEW ECONOMY. Modern Science
and Research, 2(10), 293–300.
17. Алимова, Ш. А., & Ниёзова, И. Н. (2021). Бизнес-коммуникации в системе
управления промышленных структур. Academy,(1 (64)), 55-57.
18. Abidovna, A. S. (2023). Special directions of tourism development in Bukhara region:
problems and solutions. Zien Journal of Social Sciences and Humanities, 21, 51-55.
19. Алимова, Ш. А. (2021). ЦИФРОВАЯ ЭКОНОМИКА КАК НОВЫЙ ЭТАП
ГЛОБАЛИЗАЦИИ. In АКТУАЛЬНЫЕ ПРОБЛЕМЫ РАЗВИТИЯ
НАЦИОНАЛЬНОЙ И РЕГИОНАЛЬНОЙ ЭКОНОМИКИ (pp. 234-238).
ISSN:
2181-3906
2023
International scientific journal
«MODERN SCIENCE АND RESEARCH»
VOLUME 2 / ISSUE 11 / UIF:8.2 / MODERNSCIENCE.UZ
839
PECULIARITIES OF THE AGRICULTURAL ECONOMY IN THE COUNTRIES OF
THE EUROPEAN UNION. Finland International Scientific Journal of Education,
Social Science & Humanities, 11(5), 1256-1260.
21. Jumaeva, Z. Q. "REGIONAL FEATURES OF INVESTMENT POLICY OF
UZBEKISTAN." Central Asian Problems of Modern Science and Education 2020.1
(2020): 48-55.
22. Khalilov Bakhromjon Bakhodirovich. (2023). International accounting models and their
characteristics in the conditions of innovative economy. Zien Journal of Social Sciences
and Humanities, 21, 56–60.
