Efficiency Is Necessary for a Firm and How It Affects the Bottomline

Efficiency is the extent to which time, effort, or cost is well-used for the intended task or purpose. It often comprises specifically the capability of a specific application of effort to produce a specific outcome effectively with a minimum amount or quantity of waste, expense, or unnecessary effort. "Efficiency" has widely varying meanings in different disciplines.

The term "efficient" is very much confused and misused instead of the term "effective". In general, efficiency is a measurable concept, quantitatively determined by the ratio of output to input. "Effectiveness", is a relatively vague, non-quantitative concept, mainly concerned with achieving objectives. In several of these cases, efficiency can be expressed as a result as percentage of what ideally could be expected, hence with 100% as ideal case. This does not always apply, not even in all cases where efficiency can be assigned a numerical value, e.g. not for specific impulse.

A simple way of distinguishing between efficiency and effectiveness is the saying, "Efficiency is doing things right, while effectiveness is doing the right things." This is based on the premise that selection of objectives of a process is just as important as the quality of that process.

For example, one may measure how directly two objects are communicating: downloading music directly from a computer to a mobile device is more efficient than using a mobile device's microphone to record music sounds that come from a computer's speakers.

Efficiency is often measured as the ratio r=P/C, the amount P of some valuable output produced per amount C of valuable resources consumed.This may correspond to a percentage if products and consumables are quantified in compatible units, and if consumables are transformed into products via a conservative process. For example, in the analysis of the energy conversion efficiency of heat engines in thermodynamics, the product P may be the amount of useful work output, while the...