MEASURES OF FINANCIAL PERFORMANCE

As a leader at any level, you’re going to have to analyze figures at some point and try to measure financial performance.  There are many different ways to measure financial performance.  Items such as revenue from operations, operating income, profit or net cash flow, and total unit sales can be use as measurements.  Financial ratios such as average sales margins, the cost-to-income ratio or the number of stock turns per year are just as useful.  . However these items and ratios by itself this is unlikely to tell the whole “story” as it relates to the financial health of the team, department or enterprise as a whole.

These data are provided by specialist financial managers.  The non-financial managers have to interpret the data and make use of it to manage operations.  Thus it’s their job is to acquire the appropriate knowledge which measures of financial performance is better than the others and learn how to relate one, two or more individual measures to gain a clearer view.  It’s imperative to learn to look at the major financial statements and how they relate to each other.

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Finance for Non-Financial Managers

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April 30, 2012 by Dr. Jon Warner