FIN4274 Management Accounting: Key Performance Indicator Analysis

This report provides a detailed analysis of the Key Performance Indicators (KPIs) of AHB Holdings Berhad, based on their 2017 annual report. The analysis identifies KPIs such as net profit, operating costs, total assets, cash balance, and earnings per share (EPS). It discusses the significance of these KPI...Read More

MANAGEMENT ACCOUNTING

Introduction
• The Key performance Indicators of a business are areas
which determine the overall performance of the business.
The assessment identifies the KPIs of AHB Holdings Berhad
for the current year(Ahb.com.my., 2018).
• The performance indicators in a business are considered by
potential investors before they take any investment
decisions for the business.

Identification of KPIs
• The KPIs which are identified judging from the annual report of
AHB Holdings Berhad are given below:
• Net Profit: The net profit of AHB Holdings Berhad is shown to be
RM 513,644 for the year 2017. The net profits of the business are
the main indicators of financial performance of a business.
• Operating Costs: The operating costs of any business
determine the profitability of a business and for AHB Holdings
Berhad, the operating costs of the business is shown to have
reduced slightly for the year 2017. The improvements in the costs
of the business has positive impact on profitability of the business

Identification of KPIs (Continuation)
• Total Assets: The total assets which is shown in the balance sheet
which is prepared by the business is shown to be RM 31,885,321.
The increase is total assets of the business is sign of increase in
financial strength of business.
• Cash Balance: The cash balance of the business reflects the
liquidity position of the business and thereby are considered to be
one of KPI of the business.
• Earning Per Share: The Earning Per Share (EPS) of the business
reflect the profit generated by the business per shares for the
owners of the business. The EPS of the business is shown to have
fallen and the same is shown to be RM 1.60 per share.

Analysis of KPIs of a Business
• The KPI of the business which are identified above are
considered by not only the management but also by the
potential investors to be success areas of the business.
• The net profit for AHB Holdings Berhad is an important
consideration which the affect the performance of the business
and is a key measure which is considered by the business (Kylili,
Fokaides & Jimenez, 2016).
• The costs of the business is also an important performance area
and the business is considered to have performed well in case
the management is able to control the costs of the business.

Analysis of KPIs of a Business
(Continuation)
• The total assets reflect the financial strength of the business and
is made of both current and non-current assets of the business. It
is on the basis of the total assets of the business, that the
management is able to generate revenue for the business.
• A favourable cash balance is an indicator for the overall liquidity
of the business. The cash balance in a business reflects the
ability of the business to effectively finance any projects.
• The EPS of the business is basically the return which is provided
to the shareholders per shares. The EPS of a business is
considered to a indicator for success off the business.

Limitation of KPIs
• The limitation of KPIs of the business are listed below:
• The indicators which are set by the business cover vast items and
the same needs to be followed up by the business on continuous
basis which is a vigorous task for the business.
• The setting process of KPI of a business is on the management of
the company and the judgment of the management which might
not be able to ident6ify more significant indicators of the business.
• The key performance indicators of a business should be linked
with the goals and objectives of the business which is most of the
situation not the case.

Recommendation
The recommendation which can be suggest to the management
of AHB Holdings Berhad are given below:
• The management needs to follow aggressive sales strategy in
order to improve the sales of the business.
• The business needs to further reduce the costs of the business
which can also improve the profitability of the business.
• The management of the company needs to improve the capital
structure mix of the business so that the business can finance
the activities of the business properly.

Conclusion
The analysis of the above KPI of AHB Holdings Berhad
reveals that the business is able to maintain performance
in most of the indicators except profitability which has
reduced significantly as shown in the annual report. The KPI
of the business are shown to be related to profitability and
liquidity of the business and the same are also consistent
with the goals and objectives of the business.

Bibliography
• Ahb.com.my. (2018). [online] Available at:
http://www.ahb.com.my/Annual%20Reports/AHB%20Annual
%20Report%20FY2017.pdf [Accessed 11 Nov. 2018].
• Kylili, A., Fokaides, P. A., & Jimenez, P. A. L. (2016). Key
Performance Indicators (KPIs) approach in buildings
renovation for the sustainability of the built environment: A
review. Renewable and sustainable energy reviews, 56,
906-915.
• Parmenter, D. (2015). Key performance indicators:
developing, implementing, and using winning KPIs. John
Wiley & Sons.

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