Financial term of the day is Pareto Principle. Definition of Pareto Principle A principle, named after economist Vilfredo Pareto, that specifies an unequal relationship between inputs and outputs. The principle states that, for many phenomena, 20% of invested input is responsible for 80% of the results obtained. Put another way, 80% of consequences stem from 20% of the causes. Also referred to as the Pareto rule or the 80/20 rule. Investopedia explains Pareto Principle This principle serves as a general reminder that the relationship between inputs and outputs is not balanced. For instance, the efforts of 20% of a corporations staff could drive 80% of the firms profits. In terms of personal time management, 80% of your work-related output could come from only 20% of your time at work. The Pareto Principle can be applied in a wide range of areas such as manufacturing, management and human resources. In Paretos case, he used the rule to explain how 80% of property in Italy was owned by 20% of the countrys population.
Posted on: Sat, 13 Sep 2014 10:12:35 +0000
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