Essay on Financial and Non Financial Performance Measures

An argumentative essay: Financial vs
Non-financial performance measures

TABLE OF CONTENTS
CRITICAL EVALUAION..............................................................................................................3
REFERENCES................................................................................................................................7

CRITICAL EVALUAION
In the present times, business units lay high level of emphasis on making evaluation of
business performance and aspects. By doing this, firm can get information about the area which
in turn requires improvements. For the development of strategic and competent framework
business unit must have information regarding each and every aspect. In this regard, report will
shed light on both financial and non-financial measures which in turn helps in making evaluation
of business performance prominently. According to the view of Farre-Mensa and Ljungqvist
(2016) financial measures such as sales, profit, turnover etc. are the main factors which in turn
help in making evaluation of monetary performance more effectually. The rationale behind this,
sales is one of the main indicators which in turn clearly present the extent to which customers
have positive attitude towards the products or services offered by firm. On the basis of such
aspect, by making comparison of current sales figure with the previous years, firm can make
estimation about the growth level. This aspect clearly shows that financial measure such as sales
help in making evaluation of business performance in the right direction.
However, on the critical note, Phillips and Phillips (2016) said that by assessing sales
trend company cannot make appropriate estimation regarding growth. Moreover, market trend
and competitors etc have high level of impact on business performance and growth level. Thus,
company can develop appropriate strategies and policies only when it has information regarding
both external factors. Karim and Arif-Uz-Zaman (2013) investigated and found that ratio
analysis is the most effectual technique which in turn helps in summarizing and evaluating the
business performance. Moreover, technique of ratio analysis gives quick indication about the
performance in terms of profitability, solvency, liquidity and efficiency aspect. Thus, by
undertaking such measure firm can assess profitability generated during the financial year over
expenses. However, it is to be critically evaluated by Chang and Tsai (2016), who said that
profitability ratios only entails the margin generated during the year but it does not consider non-
financial factors while assessing the reasons. Thus, non-financial factors such as employee
productivity are highly effectual which in turn helps in assessing the extent to which personnel
are doing well. Moreover, employee’s effort and their capabilities also have significant impact
on business performance. Thus, by making assessment of employee’s productivity level in