Non Financial Performance Indicators
‘In today's worldwide competitive environment companies are competing in terms of product quality, delivery, reliability, after-sales services and customer satisfaction.'
(Chairman, FTSE 100 Company, 2003)
Discuss the validity of the continuing emphasis by companies and analysts on traditional financial ratio analysis.
Does this analysis have any part to play in the modern commercial world, or should companies and analysts focus solely on non-financial performance indicators?
Traditional financial ratio analysis is useful as it summarises quite complex accounting information into a relatively small number of key indicators, relating particular figures to one another, and covering profit, liquidity, growth and risk of a company. These financial analyses include:
• Profitability ratios; these are concerned with the efficiency of the firm in generating profit and include ROCE, Return on equity ( return on shareholders' funds), Gross profit margin, and Net profit margin.......
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