AN APPROACH TO ANALYSIS OF THE IMPACT OF NATURAL DISASTERS ON THE ECONOMIC EFFICIENCY AND PROFITABILITY OF BUSINESS

Abstract

The paper purpose is to propose an approach to the analysis of the impact of various natural disasters (intense rainfall, extreme high or low temperatures, droughts, strong storms, floods, earthquakes and others) on the economic efficiency and profitability of the business. In this study, more specifically, the business companies in the sphere of production, trade and services are considered. These companies generate net income from sales of production, goods and services. In view of the successful development and sustainability of these companies, it is necessary to analyse the variations in specific ratios of two of the main business indicators (economic efficiency and profitability) under the influence of different natural disasters. The ratios related to the indicator of economic efficiency and profitability are calculated as the corresponding net revenues or profits from sales (of production, goods and services) are divided by one of the following variables: sum of the average balance values of current or fixed tangible assets, incurred full costs of the activity or other. Numerical results of several applications of the proposed approach with particular values of the variables that are included in the expressions describing the two business indicators are presented. The results of the analysis of the calculated values of the ratios related to the two business indicators (economic efficiency and profitability) before and after the possible occurrence of a given natural disaster can successfully support decision-making financial managers to take adequate measures to reduce the potential negative consequences, recover the normal operative activity or increasing resilience of companies.