Obiageli Chiaghanam Written by Obiageli Chiaghanam · 1 min read >

The concept of resource utilization and productivity are the basic and common concepts in every business organization, this is so because for a business to be profitable, it must have a high productivity and resource utilization level. These concepts mean a lot to any organization for its profitability and sustainability as intended in the going concern concept of every organization. The going concern concept is a fundamental principle that assumes that during and beyond a fiscal period, a company will prepare its current plans, use the existing resources and continue to meet its business obligation for continuity.

At every point in time, a business organization prepares its report while assuming its corporate existence in perpetuity, as seen in the preparation and presentation of its financial report otherwise, its financials will be prepared for liquidation. The concept of resource utilization is putting into use the resources available to an organization in the day-to-day running of the business to generate revenue/income and thus profit for the business. These resources must be subject to maximum use, (sweating the asset) in the voice of our corporate financial analysis faculty, to ensure their effective utilization to maximize profitability. If these resources are not fully utilized, they will be well underutilized and this implies that the organization will be losing income/revenue from its assets while incurring a cost for maintaining such assets.

The concept of productivity in the voice of every business organization is concerned with the equality of its input as compared to its output at least which represents the effectiveness of its production process all things being equal. This is expected to have equality for it to be assumed effective but where it is other than that, the production process is ineffective and must be reviewed for adequate control and monitoring. Effective productivity standards must be set and continuously measured within an organization to ensure compliance at all levels given its strategic and corporate objectives for profitability and sustainability.

This can be extended in measure to include efficiency in its resource utilization which here ensures that output is more than its input as this implies that its utilization or production process is efficient by attaining full productivity or capacity utilization where its resource is into full utilization. At this, the organization is said to be getting full value for the utilization of its resources and at this level, it is very assured that all things being equal the organization will be at a very high level of profitability concerning its line of business and sure this is where every business would like to be in all of its business processes. The effective and efficient use of all business resources is termed full capacity utilization or maximum productivity, where it is guaranteed that at this productivity level the business will be making enough profit to keep it in business for sustainability and going concerned.

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