Effectiveness and Efficiency

Write a respond adding to the arguments below or disagree with it and back your point up. Statement 1- 150 words Statement 2- 150 words Statement 1 We can define our accounting profit and loss as the variance between our expenditures and revenue. We can calculate our accounting profit or loss after accounting for all payments being made, as well as accounting for the entire net income. Once calculated, if a negative number is present then it identified as a loss, whereas if a positive number is present, then a profit is indicated. We can define entrepreneurial profit as the actual profit an entrepreneur has made: Money received – money needed to process exchange of goods/services. This can tell us if an entrepreneur is successful (profitable) or not. A negative number shows us the entrepreneur is experience a loss, whereas a positive number shows us he is profitable. We can use a profit goal for measuring effectiveness with 3 methods. For starters, we have the resource-based approach. The resource-based approach analyzes the beginning phase of the working process, determining if the business can indeed attain obligatory resources. Effectiveness is measured by how the business can efficiently obtain their resources. Next, we have the internal process approach that analyzes what is going on internally with the business. Effective can be measured by how efficient the internal operations are working. Lastly, we have the goal approach, in with the external factors of the business are reached; obtained anticipated outputs. There are many ways in which someone can achieve desired goals efficiently. Overall, the individual needs to not only know, but truly understand the goals. By understanding them, and not just knowing them, an individual will be able to identify methods that work well or do not work well in achieving the goal, as well as how to teach others how to reach the goal as well. Statement 2 Accounting profit or loss refers to a business’ total earnings.. This figure includes all costs of doing business such as operating expenses, cost of goods sold, depreciation, taxes and interest (Liberto, 2019). Profit is a net gain while loss refers to a negative total. In my venture, I haven’t made it out of the business plan development stage, so I have not actual profit or loss to report. Entrepreneurial profit or loss can most easily be equated to the economic concept of opportunity cost. The difference in money earned from what could have been earned if the investor had chosen an alternate enterprise to invest in (Adelman & Marks, p.466). If the amount earned from the chosen venture is higher than the expected return of the alternate investment, it is an entrepreneurial profit. If the amount earned is less, it is a loss. Again, since I haven’t invested any substantial capital in this venture yet, my entrepreneurial profit or loss hasn’t yet been defined. The profit goal is a way to measure of the business’ effectiveness. The goal should be an amount that covers all short-term expenses for the business to survive but also with enough left over to provide the sufficient extra capital to invest in the venture’s future growth (p. 129). For my current business plan, my goal is to produce a profit margin that enables me to sustain and grow my business. Starting out, my profit margin will have room to grow due to the higher cost of goods sold per unit and growing pains associated with perfecting the production process. It would be ambitious to assume that out of the gate, my production process would be operating at maximum efficiency.