Seminar 3

1. Synthetic indicator procedure

It is a way of ranking the entities in which the size of the indicator is determined either as a
geometric average or as a weighted average of the indices of the performance criteria of the
companies.
a) In the variant in which the economic importance is not taken into account
(variant of statisticians)
 If the performance criteria are all optimized in the same direction (max / min):

√∏
n
n
Isg (k) = Ii(k )
t=1

 Isg (k) = the value of the global synthetic indicator of company k

 n = number of selected performance criteria
 Ii (k) = the index of the performance criterion (direct / indirect) of the company k

 If the performance criteria are optimized in different ways

√
m

n
∏ Ii(k )
Isg (k)= i=1
p

∏ Ij(k )
j=1
 Ii (k) = the index of the direct performance criterion,, i ,, of the company k
 Ij (k) = the index of the indirect performance criterion,, j ,, of the company k
 m = number of direct performance criteria
 p = number of indirect performance criteria, m + p = n

b) In the version in which the economic importance of the selected performance

criteria is taken into account (economists' version)

 If the performance criteria are all optimized in the same direction (max / min):

n
Isc (k) = ∑ Ii ( k ) × pi
i=1
 Isc (k) = the complex synthetic indicator of firm k
 Ii (k) = the index of the performance criterion ,, i ,, (direct / indirect) of the company k
 pi = share of economic importance given to performance criterion I with the condition
n

∑ pi=1 sau 100 %

i=1
  If the performance criteria are optimized in different ways:

m p
Isc (k) = ∑ Ii ( k ) × pi−∑ Ij(k )× pj
i=1 j=1
 pi = the share of economic importance given to the direct performance
criterion ,, i ,,
 pj = the share of economic importance given to the indirect performance
criterion ,, j ,,

A foreign investor wants to invest in the best performing economic entity operating in the
field of plastic mass production in Romania. From the perspective of competitive analysis,
determine what his best choice must be.

Indicator Weight of Degree of achievement per entity

importance
E1(%) E2(%) E3(%) E4(%) E5(%)
1. Rr (D) 0,3 101 110 112 87 104
2. CLR(D) 0,2 95 85 101 97 105
3. R&D/TE(D) 0,05 100 78 89 102 101
4. RFA(D) 0,1 102 90 92 100 90
5. GSR(D) 0,2 87 101 100 90 105
6. PE/VA (I) 0,05 102 102 100 95 98
7. KRR/KRC(D) 0,05 98 102 108 110 105
8. AV/NE(D) 0,05 99 98 99 103 104

Rr- rate of return (Gross profit/ turnover* 100)

CLR - the current liquidity ratio (current assets/current liabilities *100);
R&D/TE - the share of research and development (R&D) expenses in total expenses
RFA - the rate of financial autonomy (Equity/total sources)
GSR - general solvency ratio (Total assets/Total liabilities);
PE/VA - the share of personnel expenses (PE) in added value (VA)
KRR/KRC is the coefficient of the ratio of receivables turnover to liabilities turnover
commercial;
AV/NE - the efficiency of the use of human resources ( Added value / Average number
of employees);

a) no economic importance- DIFFERENT WAYS

√√
m

n
∏ Ii(k )
Isg (k)= i=1
p

∏ Ij(k )
j=1

8 101 ×95 × 100× 102× 87 ×98 × 99

Isg (1) = = 30,80018 IV.
102

Isg (2) =
√
110 × 85× 78 ×90 ×101 ×102 ×98
8

102
= 29,96312 V.

Isg (3) =
√
8 112 ×101 ×89 × 92× 100× 108× 99

100
= 31,58436 I.

Isg (4) =
√
8 87× 97 ×102 ×100 × 90× 110× 103

95
= 31,31158 II.

Isg (5) =
√
104 × 105 ×101× 90 ×105 ×105 ×104
8

b) economic importance
98
= 31,2197 III.

m p
Isc (k) = ∑ Ii ( k ) × pi−∑ Ij( k )× pj
i=1 j=1

Isc(1)= (101*0,3+95*0,2+100*0,05+102*0,1+87*0,2+98*0,05+99*0,05)-(102*0,05)= 86,65

Isc(2)= (110*0,3+85*0,2+78*0,05+90*0,1+101*0,2+102*0,05+98*0,05)-(102*0,05)= 88
Isc(3)= (112*0,3+101*0,2+89*0,05+92*0,1+100*0,2+108*0,05+99*0,05)-(100*0,05)= 92,8
Isc(4)= (87*0,3+97*0,2+102*0,05+100*0,1+90*0,2+110*0,05+103*0,05)-(95*0,05)= 84,5
Isc(5)= (104*0,3+105*0,2+101*0,05+90*0,1+105*0,2+105*0,05+104*0,05)-(98*0,05)=
92,8

NO ECONOMIC IMPORTANCE
1. E3
2. E4
3. E5
4. E2
5. E2
ECONOMIC IMPORTANCE
I. E3,E5
II. E2
III. E1
IV. E4
V. -