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Value Added

Value added commercially or in business is the difference between selling price and production cost, economically it is the sum of unit profit and unit depreciation cost, unit labor cost is value added and value added gives competitive incentives to companies with more expensive products, and the consumer does not focus on the product as much as it will do The product has it, and the added value in marketing by adding the brand or logo on the product. If the mark is strong, it constitutes an added value, so it sells its product at a higher price even though its production costs are similar to competitors, outside the economy and business. The added value is the additional advantage that exceeds expectations and provides something more additional.
What is added value
What is added value

value added activities

Added value is key to creating real value, whether internally or externally, and to obtain added value for any product or service, there are activities that must be practiced sequentially: reducing risks, improving quality, timeliness and increasing capacity; Once the risk reduction starts, the output will be safe and stable and the quality will start to improve as a direct result, so the response time will increase and there will be more time for more customer orders which means that the capacity of the operations will also increase and as a result more added value:
  • Reducing risks: in the sense of making the process safer and more stable, reducing risks in the process is the first type of value-added activities by making it safe and stable, for example, on a construction site, increasing working hours without causing injuries, and in financial companies reducing the number of wrong payments to customers to zero, when Creating added value You must start by identifying how it is safe and preventing severe problems during the process.
  • Quality improvement: Product quality improvement is the second type of value-added activity. Good form must be determined, for example, in banks and insurance companies, the number of customer complaints should be reduced to zero, and airlines should reduce the number of delayed or scheduled flights to zero, so customers will realize the quality of the product and look To what they buy rather than what they pay for, quality is the hallmark of a product.
  • Timing: Provide the product or service faster, the cycle time to deliver the product is very important and affects sales and gives added value to the product, the speed of service delivery will lead to customers getting a better experience, and the ability to provide fast time means the ability to anticipate customer needs and this is one of the Challenges faced by financial institutions.
  • Increasing capacity: the ability to meet increased demand and to do more with fewer resources or copy the work from the competition, in order to provide more and more value to customers, the increasing demand from customers must be accommodated.

forms of added value

What is the significance of the value added? Value can be added to a product, service or business and value can be added by providing better or additional services such as after-sales services, better customer support and product improvement eg a computer retailer can add value by including computer accessories with the base product, Its importance lies in the fact that it contributes to increasing sales and profits and in some cases the value of the capital. There are several forms of added value, some of which are economic and market ones, and the following is a simple explanation of each of them:
  • Economic value added EVA: It is the increasing difference between the cost of capital and the company’s rate of return, while the net operating profit after tax is the profit of the company’s operations achieved after adjusting for cash taxes, and the economic value added helps to determine the cost of capital investment and to evaluate the project if it provides Enough money to be considered a good investment or not.
  • Gross value added (GVA): It helps to measure the contribution to the economy of an individual sector, a particular industry or a product, and the global value added is important as it helps in calculating the gross domestic product, which is a major indicator of the state of the country's overall economy.
  • Market value added (MVA): It is the difference between the invested capital and the market value of the business. The added value indicates the company’s ability to increase the value of shareholders over time, while its high indicates effective management and strength in operational capabilities, and its low indicates a decrease in the value of management’s actions and investments relative to the value of capital.
  • CVA: It is a measure of the amount of cash provided by the company from its operations. The added cash value gives investors a general picture of the company's ability to provide cash from one financial period to another.
  • Value Added Tax (VAT): The consumption tax that is increasingly levied on a product and at every stage of the supply chain.

Value Added Tax (VAT)

Is value added tax widely used in the world? value added tax is the consumption tax that is increasingly levied on a product and at every stage of the supply chain, from production to the point of sale. The world is a value-added tax. It raises government revenue without affecting success or wealth as an income tax does, but it depends on consumption rather than income and applies to every purchase.

How value-added tax works

value added tax is levied on the gross profit margin at each point in the manufacturing process and tax is assessed and collected at each stage, as opposed to sales Tax paid with the aid of using the customer on the stop of the deliver chain.

value added tax vs. sales tax

Value-added tax and sales tax raise revenues by the same amount, but the difference between them lies in who will pay the tax and how they pay it, for example, if the value-added tax is 10%, if the price of bread in the market is $1.10, then 0.10 is the value-added tax and it is paid to the government with parts of the farms, the bakery and the merchant each According to the price of one’s sale to the other, and as for the sales tax, if it is also 10%, the government receives 10 cents on every $1 sold and is paid in full after the sale. Only on each addition and not on selling the same product.

Global value added tax

Most of the industrialized countries that make up the OECD use value-added tax, except for the United States of America, and value-added tax systems were adopted in the eighties and the results were mixed at that time, and based on a study by the International Monetary Fund that any country turns to using value-added tax First you feel the negative impact as a result of lower tax revenue. In some parts of the world value added tax has gained a negative substance such as the Philippines, and in the 2009 and 2010 France and Germany made massive cuts in value added tax rates.

What are the negatives of value added tax?

Replacing the current income tax system with a value-added tax will simplify complex federal tax law and increase the efficiency of the Internal Revenue Service as well as financial arguments, and will make tax evasion or tax avoidance difficult but difficult to prove taxes on sales online, if the value-added tax It replaces the income tax, so the effect is only taxes when buying the commodity and it encourages saving as well. One of the disadvantages of value added tax is the increased costs in the stages of the production chain because the value added tax is calculated at every step of the sales process. Bookkeeping alone will lead to a greater burden for the company, which will affect Additional cost to the consumer, it becomes more complicated if the transactions are international. Countries may have different interpretations about the tax calculation and this results in delays in the transactions.

value added in gross domestic product

The added value of the industry is the contribution of the private sector or the government sector to the total gross domestic product, which is called the gross domestic product, if all stages of production occur within the borders of the country, then the GDP is the total value added in all stages, and the market price of the final product or the final service is the value Gross added, this is the basis on which value added tax is calculated. Industry value added is the difference between the total cost of inputs purchased from other businesses during the reporting period and the total industry revenue An industry's total revenue consists of other operating income, sales, commodity taxes and change Inventory includes inputs such as raw materials, semi-finished goods, energy and services that are purchased from other companies to produce a final product.
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