INVESTMENT MANAGEMENT

Lecture 1
The economic efficiency concept

Univ. Assist. PhD Corina MARINESCU

 Employee Employee
Indicator A B

500 1500 Optimum =

Salary
USD USD Employee B

Number of
working 10 h 150 h
hours

50 10 Optimum =
Hourly salary
USD/h USD/h Employee A
 m.u.
CO. CO. CO. CO.
Indicator
I II III IV

Annual Optimum =
100 150 200 250
revenue CO. IV

Annual Optimum =
production 75 100 145 225 CO. I
costs

Optimum =
Annual profit 25 50 55 25
CO. III

Profit rate Optimum =

33% 50% 37.9% 11.1% CO. II
(at costs)
 Efficiency
 Social efficiency
• Specific to the social-cultural area (health,
education, culture, sports etc.)
• Focus primarily on effects
• The human being is both subject and object of
the activity.
 Economic efficiency
• Specific to the economic area
• In valuing it, we equally consider efforts and
effects.
 Valuing economic efficiency
The economic efficiency implies the interaction
between the size and the structure of the efforts
made within an activity and the size and the
structure of the recorded results of the same activity.

E
e  MAXIMUM (1)



e  MINIMUM ( 2)
E
 The Efforts Typology

The efforts are quantified by volume indicators,

expressed in physical units or in monetary units.

a) The efforts can be divided in two categories by the

activity they are referring to:
- investments efforts;
- production efforts.

b) When referring to the period an effort is made, two

categories appear:
- annual efforts;
- total efforts;

c) The economic efforts may be:

- labor efforts;
- material efforts.
 The Effects Typology
a) Considering occurrence site:
- direct effects (analyzed object / activity level);
- indirect effects (obtained to the beneficiaries of the basic
products, downstream of the analyzed activity);
b) Depending on the period in which they occur, the effects can
be:
- annual;
- total (obtained over the entire operation period of an
activity);
c) By degree of knowledge, the effects are classified into:
- expected effects;
- actual effects.
d) Considering the appearance moment, the economic effects can
be:
- present;
- upcoming.
e) Considering their inclusion capacity:
- global effects (gross effects);
- net effects (they appear after lessening the total effect with
the effort). Examples: the profit, the net income, etc.
Maximum of efficiency?
E
e  MAXIMUM


E max
eMAX 
 min
Maximum of efficiency?

Ecertain
eMAX 
 min
(1)

E max
eMAX  (2)

 certain
Economic implications of the efficiency

Time economy

Additional effects
 The relationship between optimal and efficient

In any human activity there are several effective options, but only
one option is optimal / optimum.
As a result, the optimal-efficient relationship = part-whole ratio
 The characteristics of the optimum:

A. Depending on the level at which the analysis is performed:

- Partial (referring to economic subdivisions– departments, directions

etc.);
- Total (refers to the entire analyzed system– company, national
economy etc.).

B. The relativity of an optimum is based on 3 arguments:

1. In terms of time;

2. in terms of the number of available options/variants;

3. in terms of the number of covered criteria.

THANK YOU FOR YOUR
ATTENTION !