Describe the Methods Used to Calculate Value Added. How Does Value Added Contribute Towards Understanding the Connections Between the Business and Its Product Markets? Use Relevant Examples to Illustrate Points.
Essay n°=1: Describe the methods used to calculate value added. How does value added contribute towards understanding the connections between the business and its product markets? Use relevant examples to illustrate points.
Within the framework of value added in general, Pigou and Bernard Cox suggested the calculation of Value Added that is used for classical nationals accounts. In 1920, Pigou gave his interpretation of value added, consisting of being able to precisely determine the earnings of a company; whereas the sales turnover isn’t precise since the expenses aren’t take into account. In this fact, he presents value added as the subtraction of the output related to the inputs. Thus, outputs that aren’t generated by our self aren’t taken in account. In 1979, B. Cox in his book “value added” agrees with Pigou’s definition and goes even further in his explanations. He interprets value added in two different points of view: the subtractive and the addictive. On one hand, the subtractive value added, is calculated by subtracting purchases of materials and services from sales revenue. This value added represents its creation. On the other hand, addictive value added is calculated by adding labour cost (including social charges), depreciation, and operating profit. This enables us to estimate the way in which the created profit should be distributed. A business is a system in which goods and services are exchanged; market product is a market where products are sold (usually to organisations). Therefore, business and product market are connected since the business allows products to be sold in markets.
Finally, there is a correlation between vertical integration and value added. In fact, the more a company has resorts to vertical integration, more its Value added ratio would be high. But most of companies do not create, on their own, their products completely. We come to wonder, if value added is a key element for business and its product market, and
Within the framework of value added in general, Pigou and Bernard Cox suggested the calculation of Value Added that is used for classical nationals accounts. In 1920, Pigou gave his interpretation of value added, consisting of being able to precisely determine the earnings of a company; whereas the sales turnover isn’t precise since the expenses aren’t take into account. In this fact, he presents value added as the subtraction of the output related to the inputs. Thus, outputs that aren’t generated by our self aren’t taken in account. In 1979, B. Cox in his book “value added” agrees with Pigou’s definition and goes even further in his explanations. He interprets value added in two different points of view: the subtractive and the addictive. On one hand, the subtractive value added, is calculated by subtracting purchases of materials and services from sales revenue. This value added represents its creation. On the other hand, addictive value added is calculated by adding labour cost (including social charges), depreciation, and operating profit. This enables us to estimate the way in which the created profit should be distributed. A business is a system in which goods and services are exchanged; market product is a market where products are sold (usually to organisations). Therefore, business and product market are connected since the business allows products to be sold in markets.
Finally, there is a correlation between vertical integration and value added. In fact, the more a company has resorts to vertical integration, more its Value added ratio would be high. But most of companies do not create, on their own, their products completely. We come to wonder, if value added is a key element for business and its product market, and