Estimation of Flexibility of an Organization on the Ground of the Calculation of Profit Margin Rate
Estimation of Flexibility of an Organization on the Ground of the Calculation of Profit Margin Rate

Summary/Abstract: The article deals with the problem of the flexibility of an organization as the ability to adapt effectively tothe external environment. The authors have identified and investigated different approaches to estimatingthe flexibility of an organization on the ground of flexibility grading, calculation of the general index of flexibilityas well as the calculation of flexibility’s ranking score. We have identified the advantages and disadvantagesof these approaches. A new method of the estimation of an organization’s flexibility on the groundof the calculation of relative profit margin has been developed. This method is the multifunctional assessmenttool of enterprise’s functionability in the current context of difficult and volatile economic environment.It allows in the early stage to identify negative trends in the production and financial figures and thus, it enablesthe organizational leadership to take steps in advance in order to avert a crisis in its activity. Keepingthe profit margin at the same rate at the forced contraction of output, because of the negative impact of externalfactors, will confirm that the organization has adapted to the external environment and, therefore, it isflexible. The organization can be considered with margin rate beginning to low up to zero value as an organizationwith an insufficient level of flexibility that is at the “zone of crisis” and it is characterized by the depletionof reserved funds and reduction of current assets. Loss-maker is nonflexible and the presence of lossmeans that the organization has an evident sign of crisis and it can be bankrupt.

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