Proceedings

Table 9. Simulation of index deviation for revenue, profit and depreciation
Revenue
index
Profit
index
Depreciation
index
~ 830 ~
Revenue
Index
deviation
Profit index
deviation
Depreciation
index
deviation
0.989382 0.989382 1.100000
0.989268 0.989268 1.090909 -0.000114 -0.000114 -0.009091
0.989151 0.989151 1.083333 -0.000116 -0.000116 -0.007576
0.989032 0.989032 1.076923 -0.000119 -0.000119 -0.006410
0.988911 0.988911 1.071429 -0.000122 -0.000119 -0.005495
0.988786 0.989032 1.066667 -0.000124 -0.000122 -0.004762
0.988659 0.988786 1.062500 -0.000127 0.000122 -0.004167
0.988529 0.988659 1.058824 -0.000130 -0.000246 -0.003676
0.988396 0.988396 1.055556 -0.000133 -0.000263 -0.003268
Both the numbers and the chart, show that altering the asset structure, as increasing
non-current asset ratio determines a relative decrease in total revenue, total profit and
relative increases of depreciation expenses.
Practically for every 5% increase in noncurrent assets, revenue and profit register a
1% decrease, while depreciation expenses register a minimum 1% increase, which
causes the relative profit margin to reduce approximately 2%.
I > I > I
DEPRECIATION.
EXPENSE
REVENUE
PROFIT
In conclusion, this correlations’ appearance between the three measures is tantamount
to a reduction in the dynamic of the profit margin. The intensity of reducing relative
revenue return depends on the structural asset variation. According to the simulation,
to a 5% increase in the non-current asset ratio, the revenue return diminishes by 2%.
For the organizations’ management using this method would mean determining asset
structure for two consecutive periods and identifying the dynamic trend. Assuming
the non-current assets grew with x%, the relative change in revenue returns (y %) due
to structural asset alterations will be
x ⎛ 2 ⎞
⋅ ⎜−
⎟
100 ⎝ 100
y =
⎠
5
100
Therefore, we are talking about diminishing relative and absolute returns. The
absolute value of the percentage point of diminished returns will be determined
according to the absolute profit size.
These conclusions ware determined from a simulation, which did not consider internal
or external factors relative to the company. That is why there is a certain probability,
in a certain context, the structural asset alteration that we presented be present in the
financial statements. The management should consider this aspect and follow the
implementation of efficiency principles in management.
DISCUSSION AND CONCLUSION
In conclusion, the management tendency to invest in long-term equipment and
technologies, motivated by the desire to keep up with innovations in the field to