Financial measures Essay Example | Topics and Well Written Essays - 500 words

Financial vizors - Essay ExampleFinancial measures are the traditional mavens for evaluating operational performance, benchmarking competitors, and comparing industry results. To determine whether a confederation is profitable, profitability ratios like return on equity, return on assets and net profit margin may be used. Other companies or competitors normally use the same ratios also so that comparison and benchmarking are possible among companies (Meigs, Meigs & Meigs, 1995). However, it does non mean that non-financial measures are not useful since normally they are the underlying explanations of the difference in performance measures. To illustrate in the case of two similar companies in the industry, it is possible that one has more revenues or higher profitability than the other does. What could explain the difference between the two companies may be in the more loyal and expeditious gross sales force of one company over the other. Upon investigation, it can be found t hat personal objectives of the workforce or people of the more profitable company are tied with the corporate financial objectives. The human resource contribution, which is basically non-financial, is normally not emphasized in the financial statements but they could constitute the agonistic advantage on one company over the other company. After knowing that a company has more loyal and hard working sales force, the same company could sustain profitability or further the advantage and that makes the non-financial measure very useful. Of course they are other non-financial measures such as smash customer service, better attendance of employees in meeting, zero absences in important activities, timely submissions of reports by concerned employees or departments (Streetdirectory, 2010).The advantage and disadvantage of each measure can be drawn from the example given. Financial measures are readily measurable and are closer to measuring attainment of measurable financial objectives. It is easier to