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Proper capital management is important to the financial health of a firm, with efficient resource allocation through capital management, firms can improve its cash flow and profitability. Capital management involves tracking various ratios within the firm, most important ones include: [92] Capital ratio; Inventory turnover ratio; Collection ratio
While diseconomies of scale are typically associated with large mature firms, similar problems have been observed in the growth phase of small and medium-sized manufacturing companies. Mclean [3] has observed that this can occur once the workforce exceeds around 20 employees. At this point business complexity grows more rapidly than revenue.
In addition to monopoly, sociologists have identified a number of ways in which markets may be organizationally embedded, and thus may depart in behavior from economic theory. [5] Organizational slack occurs when firms opt to employ more resources than are needed to produce a given level of output. Unused capacity results in X-inefficiency.
Whereas economies of scale for a firm involve reductions in the average cost (cost per unit) arising from increasing the scale of production for a single product type, economies of scope involve lowering average cost by producing more types of products. Hofstrand notes that the two types of economy "are not mutually exclusive". [6]
There is more than one firm and all firms produce a homogeneous product, i.e., there is no product differentiation; Firms do not cooperate, i.e., there is no collusion; Firms have market power, i.e., each firm's output decision affects the good's price; The number of firms is fixed; Firms compete in quantities rather than prices; and
Economies of scale occur where a firm's average costs per unit of output decreases while the scale of the firm, or the output being produced by the firm, increases. [32] Firms in an oligopoly who benefit from economies of scale have a distinct advantage over firms who do not.
A special type of Oligopoly, where two firms have exclusive power and control in a market. Both companies produce the same type of product and no other company produces the same or alternative product. The goods produced are circulated in only one market, and no other company intends to enter the market.
Two different types of cost are important in microeconomics: marginal cost and fixed cost.The marginal cost is the cost to the company of serving one more customer. In an industry where a natural monopoly does not exist, the vast majority of industries, the marginal cost decreases with economies of scale, then increases as the company has growing pains (overworking its employees, bureaucracy ...