A Model for the Sustainable Management of Enterprise Capital

Abstract

This paper attempts to develop the concept of sustainable management of enterprise capital presented, e.g., in Economies at the beginning of the year 2020. After an introduction and presentation of the theoretical grounds for the construction of the model, the authors attempt at describing its characteristics in a few points, determining the relationship between the objectives of an enterprise and the capitals that constitute the elements of that enterprise. The main assumption in the model is that the management of an enterprise is a constant process of striving to achieve a goal or goals, and balancing the level of the capitals within the enterprise. The point of balance between six capitals of an enterprise entails, at the same time, the maximum effectiveness of this enterprise. The more effective an enterprise, the quicker the managers will reach the point of balance between the capitals, and the longer the managers will maintain the values of the capitals near the balance point. As a measure of effectiveness, the authors propose a coefficient of a mean percentage-rated difference between the capitals, which reflects the mean non-adjustment of the capitals, and the weighed capital differences coefficient, which reflects the effectiveness of an enterprise as a whole. In the second part, the authors prove that, simultaneously, both management based on the presented model, which is based on the effectiveness of achieving objectives, as well as the effectiveness of the capitals of the enterprise, with the use of the new economic ratios as indicated, may be an alternative to globally prevalent revenue as an economic measurement.