Management Journals | Operations Management

The IUP Journal of Operations Management

Impact of Operational Efficiency on Financial Performance: An Analysis of Select Power Companies

Article Details

Pub. Date	: Nov, 2022
Product Name	: The IUP Journal of Operations Management
Product Type	: Article
Product Code	: IJOM021122
Author Name	: Suchitra Pinninti and Venkata Ravi Ram Pinninti
Availability	: YES
Subject/Domain	: Management
Download Format	: PDF Format
No. of Pages	: 13

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Abstract

This paper attempts to correlate the operational performance of firms with their financial performance using ratio analysis. Operational efficiency ratios give a clear picture of an organization's capabilities, especially in effective utilization of its resources to maximize returns to all stakeholders. In this study, the managerial effectiveness of three major energy firms has been considered. Four key ratios-inventory turnover, fixed asset turnover, investment turnover and debtor turnover ratios-have been taken into account when calculating efficiency. It is not enough that an organization's operations are managed effectively; it is also important how the organization will be impacted in the face of a crisis. The debtors' turnover ratio analysis can provide us clarity if the organization has better liquidity management. The study, conducted from 2016 to 2020, contrasts the organizations based on a chosen operational efficiency ratio at the same point in time, in what is termed as horizontal or cross-sectional ratio analysis.

Introduction

Following the Covid-19 lockdown across the country in March 2020, electricity distribution businesses realized the importance of flexible, competitive, and effective power procurement. Regardless of the amount of power they purchased, many of them had been losing millions of rupees due to set rates for power under long- and mediumterm Power Purchase Agreements (PPA). Savings with flexibility are now more important than ever due to the sharp decline in revenue from the system's most lucrative