Financial performance thus, is the quality of management of assets in a specific business firm from the starting point to the result; revenues of the firm. Financial performance can be measured depending on several factors, and this measure provides us with a good indicator whether the firm is financially healthy or not. The indicators of the financial status of a specific business are directly related to the statistical relations between its financial account components. These statistical relations are summarized by ratios that determine the financial stability of the business according to a chart of comparison and can be used also to determine the future financial balance of the business. Financial performance is measured based on the following indicators: Profitability, Liquidity, Solvency and Financial efficiency.
1.1 Background of the study Every business has two primary objectives that are profitability and solvency. Profitability represents the ability of a business to make profit, while solvency represents the ability of a business to pay its debts as they come due. Besides that, accounting measures, financial information and economic information needed for decision making of a company. Thus, through these will allow the management of the company to make accurate judgments and decisions. The Income Statement shows the profitability or operating results of a business, while the balance sheet shows the solvency or financial position of a business.
Lastly, CFOs should possess good relationship management skills. In fact, CFOs deal with many stakeholders while carrying out their duties. For this reason, CFOs should have formidable relationship management skills since all entities engaged in the business should be able to voice their concerns and opinions through
On the financial perspective, the balanced scorecard makes the organization aware and cautious of its financial position as well as its financial capabilities. The company’s capability to gain money and spend it, and sustain its operations with the funds available making this perspective a very important one. It is of great importance that the organization keeps track of its financial information and at the same time finds better ways of creating profits. In this case, the company is keeping track of its financial information, and we can see that they have a strategy to invest in a new product line that will help increase revenue and profits for the company. Since one of the concerns of a balanced scorecard is a strategy, the financial perspective makes it possible for the management of the company to see whether the budget they had at hand is possible for them to carry out a new
Budgeting in this business helps as it can show how much money is coming in and out of the organisation, such as the CEO would be aware of how much they would need to spend on each department and how much would return as they would not wish to overspend and lose the money. Also using budgeting, it helps B.A identify inefficient expenditures and they can adapt quickly leading them to achieve their financial goals. This business uses budgets so it can set financial targets, to motivate employees and to assign responsibilities, to improve proficiency, to provide and turn strategic direction and objectives into practical reality, to monitor business performance and to control income and expenditure so the business does not overspend and to ensure there is enough capital set aside for emergencies. To conclude, this business uses budgeting in order to create an action plan for their business which can identify current available capital and estimates costs and anticipates
Financial ratio analysis helps management (1) maintain sufficient working capital to support operations; (2) project how changes in sales, costs, prices and so on will affect capital needs and profits; (3) analyze management performance; and (4) measure the profitability of company units, products and departments. From a management perspective, the rationale for use of financial ratio analysis is that by expressing several figures from financial statements as ratios, information will be revealed that is missed when the individual numbers are observed. The theory is that managers can then use this information to improve the efficiency and profitability of their operation. Associated with this theory is the implicit assumption that information from ratio analysis, especially trend analysis, enables management to foresee and possibly avoid business failure (Thomas III and Evanson, 2006). Several practitioner-oriented publications suggest that financial ratios do not vary with firm size within an industry (Westwick 1987 and Centre for Interfirm Comparison 1977).
This performance metrics was initiated to measure internally the financial performance of the company as long as value creation is concerned. Defence of DSM’s competitive advantage Relating to DSM’s attainment of competitive advantage in the market, it is one that can be defended with several points that have also bettered performance. These points come in form of planning, organization, and control. When it comes to planning, DSM has been able to put in place much efforts in making strategic plans. These plans are tied to the vision and mission statements of the company.
It is promulgates about the competency of managing money. Intact financial literacy echelon facilitates people to accomplish financial self-sufficiency and stability. It helps an individual to formulate luminous plans with regard to earning, spending, saving and investing. NABER working paper series on financial literacy defines financial literacy as, “the ability to use knowledge and skills to manage one 's financial resources effectively for lifetime financial security.” People of all age groups require sound literacy in managing finance. It not only affects the individuals, but also the development of
A budget is the financial resource statement in which all the activities related costs are budgeted in order to provide an overview of the expected expenses. In order to overcome the negative consequences of the performance, the managers make use of budgetary controls. This is the process of comparing budgets with the actual operational results. The budgetary control assists the managers in the process of planning, decision-making, coordination between departments, motivation of employees, and monitoring results in order to achieve business objectives. Budgetary control is considered as important process for organisations because it helps in enhancing and improving the performance of the company.
The objective of ratio analysis is to judge the earning capacity,financial soudness and operating efficiency of an business organization. The use of ratio in financial management analysis helps the management to know the profitability,financial position (liquidity and solvency) and operating efficiency of an enterprise. There are various advantages derived by the use of accounting ratios. It simplifies, summarizes and systematizes a long array of accounting figures to make them understandable. It is also useful for diagnosis of the financial health of an enterprise.