Poznań University of Economics, Польша
Участник конференции
JEL: D53
Purpose
The purpose of present study was to determine which model arrangement of indicators (qualitative or quantitative) generates more knowledge for managers.
Design/methodology/approach
The case study method was used. A company listed on Warsaw Stock Exchange during 2008-2013 was chosen for exemplification.
Findings
It was found that model arrangement if qualitative indicators allows generating more knowledge useful in management process.
Research limitations
The research was performed on one enterprise, expanding the number of companies under investigation would be beneficial.
Implications The paper postulates the usage of model arrangement of qualitative indicators in management process.
Originality/value
The paper consists an addendum for the discussion on qualitative and quantitative measures.
Keywords: qualitative indicators, quantitative indicators, finance
1. Introduction
Current scientific discussion concerns inter alia the advantages and disadvantages of quantitative and qualitative measures [Moorse 1991, Newman and Benz 1998, Pekrun et al. 2010, Berg and Lune 2011]. It is especially important in every company during management process when precise knowledge is the key for rational decisions [Szutowski 2013]. Both measures are used for different purposes and deliver different results. Qualitative ones are useful to gain insights into the problem, understand the reasons and uncover prevalent trends. The outcome of qualitative research is explanatory, however findings are not conclusive and do not allow the generalisation of results. Quantitative measures are used mainly to quantify data and measure the incidence of different views. Quantitative study’s results are conclusive and may be generalised (if other requirements are met). In order to deepen the exploration quantitative research can be followed by a qualitative one [Snap 2014]. At the same time the primary aim of every company is to maximise its value [Copeland et al. 1997, Rappaport 1999, Borowiecki 2001]. Thus the usage of both qualitative and quantitative measures should allow decisions leading to value increase. In present paper quantitative and qualitative measures are represented by two model arrangements of indicators delivered by Bednarski [2007]. The first one contains of three inequalities based on absolute values, while the second one encompasses five inequalities based on calculated relations. Both use indexes, thus indicators represent the change from one period to another. Present paper is organised as follows: first the method used in empirical research is presented, than the study’s results. The paper finishes with conclusions.
2. Method
Present research aims at determining which model arrangement of indicators (qualitative or quantitative) generates more knowledge for managers. In order to achieve such purpose a case study method was used. One enterprise listed on Warsaw Stock Exchange (WSE) was chosen to exemplify. WSE was selected due to its dominant regional position and the highest standards of data delivery [WSE 2014]. The time scope was determined as 2008 –2013. However data required for calculating indexes was gathered also for 2007. The data used in the research was publicly available. All necessary data was collected through company’s website and WSE’s databases.
3. Results
First the model arrangement of quantitative indicators is presented, than the focus is set on qualitative one. Lastly both are compared.
3.1 The model arrangement of quantitative indicators
Every company has at its disposal the possibility of growth and development based on either intensive either extensive management. The first one is characterized by achieving favourable selling prices, triggering internal reserves and effective technical and organizational progress [Helfert 2004]. The second is based on increasing the number of employees and assets. From the perspective of company’s development intensive growth is much more valuable as it does not lead to the increase in costs. Presented below model system of quantitative indicators is based precisely on the above presented possibilities. It is organised as follows [Bednarski 2007]:
i_{R}<i_{M}<i_{P}<i_{Z}
i – index (reflecting the change from one period to another)
R – number of employees
M – total assets
P – revenue
Z – profit
The first inequality (i_{R} <i_{M}) shows that company grows in assets faster than augments its employment. Such dependence may indicate a desire to increase efficiency while controlling salary costs. The number of tools at the employees’ disposal grows, leading to increased efficacy.
The second inequality (i_{M} <i_{P}) illustrates that the revenue grows faster than the total value of assets. Such situation can result from increased effectiveness of asset usage.
Third inequality (i_{P} <i_{Z}) refers to the more dynamic growth of profits than the growth of revenue. Such situation may result from obtaining higher sale prices or costs reduction.
Table 1 contains the calculations of all indexes for the chosen company. The calculation constitutes a basis for the analysis. Consecutive values calculated for a chosen year should be compared one by one to check the three model inequalities.
Table 1.
The quantitative indexes calculated for exemplary company.
| 2008 | 2009 | 2010 | 2011 | 2012 | 2013 |
i_{R} | -8% | -7% | -17% | -5% | -15% | -12% |
i_{M} | 3% | 5% | 5% | 0% | -6% | -5% |
i_{P} | 6% | 9% | 1% | -27% | -4% | -12% |
i_{Z} | -9% | 73% | -83% | -123% | -277% | 1007% |
Source: own development
Above results indicate clearly that company’s performance varied considerably from one period to another. The exception is the year 2009, when the desired inequalities were achieved. What seemed especially important was the strong fluctuation of the company’s profit index. This situation was caused by the low absolute values of profit in consecutive years. Such state leaded to that a small change in the absolute value of the profit was high in percentage terms.
The level of employment was key for the whole analysis. Due to this fact the number of employees is presented below. The employment index shows a steady negative value. This is the effect the company restructuring. Data on employment is presented in Table 2.
Table 2.
Number of employees in exemplary company.
| 2008 | 2009 | 2010 | 2011 | 2012 | 2013 |
Employment in thousands | 6,6 | 6,1 | 5,1 | 4,8 | 4,1 | 3,6 |
Source: own development
Consistent decrease in the number of employees is associated with an attempt to increase profitability. Adapting to market requirements takes place in the framework of restructuring plan launched in 2007.
3.2 The model arrangement of qualitative indicators
The results obtained in the model arrangement of quantitative indicators need to be supplemented by qualitative indicators. The model arrangement includes six quality indexes and the five inequalities. It is organised as follows [Bednarski 2007]:
i_{MR}<i_{PM}<i_{PR}<i_{ZP}<i_{ZM}<i_{ZR}
i – index (reflecting the change from one period to another)
MR – assets for one employee
PM – asset turnover
PR – labour productivity
ZP – return on sales
ZM – return on assets
ZR – profit per employee
The interpretation of consecutive inequalities is as follows. First one (i_{MR} <i_{PM}) indicates that assets for one employee grow slower than the asset turnover. This signifies that company experiences an intensive growth (as opposed to extensive one), which is positive.
The second inequality (i_{PM} <i_{PR}) illustrates a situation where labour productivity growth exceeds the growth of assets turnover. This indicates the effective use of the human capital and assets.
The third inequality (i_{PR} <i_{ZP}) reflects a higher return on sales growth rate than the one of labour productivity per employee. This reflects an increase in sale prices or a reduction in costs.
The fourth inequality (i_{ZP} <i_{ZM}) shows that the growth of the return on sales is smaller than the growth of the return on assets. This situation can be observed when both current and fixed assets are used in more effective way.
The fifth inequality (i_{ZM} <i_{ZR}) illustrates that the growth of profit per employee excess the growth of the return on assets. This situation reflects increased financial efficiency of the employees.
Table 3 presents all the indexes calculated for the period 2008-2013 for the exemplary company. The calculation constitutes a basis for the analysis. Consecutive values calculated for a chosen year should be compared one by one to check the five model inequalities.
Table 3.
The qualitative indexes calculated for exemplary company.
| 2008 | 2009 | 2010 | 2011 | 2012 | 2013 |
i_{MR} | -11% | -11% | -21% | -5% | -9% | -8% |
i_{MP} | -2% | -4% | 4% | 37% | -2% | 9% |
i_{PR} | 15% | 18% | 22% | -23% | 12% | 0% |
i_{ZP} | 17% | -37% | 496% | -413% | -154% | -92% |
i_{ZM} | 14% | -40% | 520% | -530% | -153% | -91% |
i_{ZR} | 2% | -46% | 390% | -509% | -148% | -92% |
Source: own development
The model arrangement of qualitative indicators was not achieved in any of the studied years. Which signifies that company’s development was not on the model track. The first inequality was achieved in all six studied years and results from the improvement in marketing and sales departments launched in 2009. Second inequality is achieved in four studied years, which signifies that the restructuring policy was partially successful. Inequalities three, four and five generally were not met. This implies that despite strong improvement propensity, company’s development was not successful. It is the most important conclusion steaming from the Table 3.
3.3 Comparison
According to model arrangement of quantitative indicators company’s performance was at its peak in 2009. All the inequalities were met. In 2008, 2010, 2012 and 2013 two out of three inequalities were met and in 2011 only one. The results from model arrangement of qualitative indicators deliver different conclusions. In 2010 four out of five inequalities were met and it was the best result. In 2008 and 2012 three out of five inequalities were met and in 2009, 2011 and 2013 only two. However the analysis is superficial and every variable should be analysed in details.
Both model arrangements offer different informative value as the qualitative one relies on more inequalities than quantitative one. Thus more knowledge can be generated during the analysis. Lastly qualitative set of indicators relies on relations instead of absolute values. Thus it can be concluded that the indexes imply wider interpretation possibilities.
4. Discussion and conclusions
The main purpose of present research was to determine which model arrangement of indicators (qualitative or quantitative) generates more knowledge for managers. The data for exemplary company listed on Warsaw Stock Exchange was used to test model arrangements of indicators delivered by Bednarski [2007].
The research’s results indicated that the model arrangement of qualitative indicators offer more information. The consecutive indexes represent relations between variables instead of their absolute values. Thus their informative value is higher. Also qualitative model arrangement consists of five inequalities instead of three in quantitative one and offers more data to interpret. Finally both model arrangements deliver different results. According to quantitative one the best year of company’s performance was 2009 (all inequalities met the requirements) as opposed to qualitative one according to which company’s performance was the best in 2010 (four inequalities met the requirements).
The results can apply to the world of practice by presenting the advantages of qualitative model arrangement over the quantitative ones and by postulating the use of both in management process as they have a mutual explanatory power. Paper’s main purpose was achieved, however due to performing the study on one case it seems beneficial to augment the number of studied companies in further research. Also present research concentrated only on the model arrangements delivered by Bednarski [2007]. It seems important to verify various different approaches delivered in the literature.
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