Financial and Non-financial Indicators of Business Performance and Role of HR in Business Planning and Change Management

0Running head: BUSINESS PLANNING
Business Planning
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BUSINESS PLANNING
Financial and Non-financial Indicators of Business Performance
Financial Indicators of Business Performance
Gross Profit Margin Gross profit margin = (revenue – cost of products sold)/ revenue
The gross profit margin must be large enough in order to
accommodate the fixed expenses like manufacturing cost and
operational cost. Gross Profit Margin is thus defined as the financial
measurement of how a company regulates its overall costs. Under
the gross profit margin there lies EBITDA (Earnings before
interest, taxes, depreciation and amortization) that measures how a
company controls its operating expenses, along with other
associated costs (Delen, Kuzey and Uyar 2013).
Net Profit Net Profit = Total revenue – total expenses
The increase in the net profit margin is a direct indicator of business
success (Sauaia 2014).
Net Profit Margin Net profit margin = net profit/total revenue
Net profit margin is effective as leverage in terms of explaining the
variance. The Operating Expense-to-Net Sales Ratio cast maximum
positive loading over Net Profit Margin. The Net Profit Margin also
imparts significant positive loading value on this factor. Thus these
factors are mutually exclusive and an important determinant of a
company’s profitability which is relative to its sales revenues
(Delen, Kuzey and Uyar 2013).
Current Ratio Current ratio = current assets/current liabilities. Current ratio