(Analyzing The Effects of Financial Ratios on the Efficiency of Companies by Using VZA Method: An Implementation in Woven Clothes and Leather Sector of Bist)

Abstract

Purpose – In the present study, it was aimed to determine the efficiency of the companies traded in Woven Clothing and Leather sector of BIST, as well as the financial ratios determining this efficiency. Design/methodology/approach – In the present study, within the scope of the financial ratios of 19 companies, which are traded in Woven Clothing and Leather sector of BIST, obtained from their financial reports of year 2017, the efficiencies of these companies and the financial rates determining that efficiency were analyzed using CCR, which is one of the VZA methods. Findings – At the end of analyses, according to the Constant Returns to Scale (CCR) method, it was determined that 8 companies were efficient but 11 companies were not. Using the financial ratios determining the efficiency of the companies, it was determined that the most effective ratios were found to be current ratio that is one of the variables calculated using inputs and the ratio of market value to book value that is one of the financial ratios calculated using output. Moreover, the potential improvement ratios needed for making the companies more efficient were calculated and the suggestions were provided. Discussion – The intensity of competition in today’s markets puts the concepts such as efficiency, performance, and productivity into the forefront. The intense competition requires the use of corporations’ resources in the most productive manner. Thus, in the present study, the companies traded in Woven Clothing and Leather sector of BIST will be able to assess their performances in the industry, in which they compete, and develop plans according to the estimated status and goals by making use of the potential improvement rates determined in this study in order toPurpose – In the present study, it was aimed to determine the efficiency of the companies traded in Woven Clothing and Leather sector of BIST, as well as the financial ratios determining this efficiency. Design/methodology/approach – In the present study, within the scope of the financial ratios of 19 companies, which are traded in Woven Clothing and Leather sector of BIST, obtained from their financial reports of year 2017, the efficiencies of these companies and the financial rates determining that efficiency were analyzed using CCR, which is one of the VZA methods. Findings – At the end of analyses, according to the Constant Returns to Scale (CCR) method, it was determined that 8 companies were efficient but 11 companies were not. Using the financial ratios determining the efficiency of the companies, it was determined that the most effective ratios were found to be current ratio that is one of the variables calculated using inputs and the ratio of market value to book value that is one of the financial ratios calculated using output. Moreover, the potential improvement ratios needed for making the companies more efficient were calculated and the suggestions were provided. Discussion – The intensity of competition in today’s markets puts the concepts such as efficiency, performance, and productivity into the forefront. The intense competition requires the use of corporations’ resources in the most productive manner. Thus, in the present study, the companies traded in Woven Clothing and Leather sector of BIST will be able to assess their performances in the industry, in which they compete, and develop plans according to the estimated status and goals by making use of the potential improvement rates determined in this study in order to improve their efficiencies. With a similar approach, the intersectoral efficiency comparisons cam be made by assessing the other sectors; the policies for the allocation efficiency in terms of the lifetime of industries and economy and the suggestive results can be achieved for the employment.