Importance of Non-Financial Measures in Business Organizations

This article discusses the historical bias towards financial performance measures and the increasing importance of non-financial measures in contemporary business organizations. It also covers the topics of behavioral ethics, corporate finance failures, and the mandatory nature of sustainability reporting.

Assignment

Table of Contents
Question 1.............................................................................................................................................2
Question 2.............................................................................................................................................2
Question 3.............................................................................................................................................3
Question 4.............................................................................................................................................3
References.............................................................................................................................................5
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Question 1
The business firms are historically biased towards financial performance measures rather than
non-financial measures as the availability of the financial data is much more in comparison to
the non-financial data. The business firms were previously concerned for only the financial
performance of the organizations. Even very few organization were aware of the non-
financial performances of the organization as well as non-financial measures, which could
support in assessing the non-financial performances of the business organization. In the past
days, there was lesser competition in the market and the firms are mainly concerned about the
financial performances of the organization (Mclaney, 2017). Moreover, the financial
measures, which were traditionally used widely to assess the financial performance of the
business organizations in order to recognize the profitability of the business organizations.
The financial measures like earning per share, operating profits etc. were broadly used to
assess the economic performance of the business organization to measure the economic
viability of the business organizations. However, in the current business context, the non-
financial performance of the organization is getting equal importance as the financial
performances and hence, the non-financial measures are also obtained equal importance like
the financial measures. The non-financial measures like consumers satisfaction, quality of
management, innovation etc. are also implemented by the contemporary business
organization to assess the performance of the organization as these measures also influence
values of shareholders (Dlabay and Burrow, 2008).
Question 2
The behavioral ethics is one of the most discussed topics among the academicians and the
management people. It is widely observed that some of them within a company is considered
as unethical, whereas the same behavior for the other companies is considered as ethical
behavior. For example, the strictness towards the employees can be considered as an
unethical behavior for a company where the employees use to deliver hard work for the
organization (Boylan, 2014). However, in the cases where the strictness is necessary to
manage the employees to bring out their performances. Besides this, for the insurance
business, the companies trade the uncertainty and it is ethical for the insurance business but is
unethical for other business. The ethics are a morality that supports the individual as well as
the organization in taking a decision which is ethically correct (Shaw, 2017).
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Question 3
The corporate finance failures can be avoided easily irrespective of the external factors are
found to be provided in the following points:-
 Managing the cash flows: The management of cash flows for the organization is
essential for mitigating the issues as well as it is helpful for maintaining a balance in
the business sales and the covering expenses.
 Development of Strong Business plan: The development of the strong business plan is
essential for the purpose of gaining the business successes and also it helps the
company to bring its revenues for making the growth of the business (Ross,
Westerfield and Jaffe, 2008).
 Avoiding High Debts: The high debts must be avoided so that the expenses of the
company can be reduced as well as the appropriate expansion of the customer base
can be made.
 Preparing accurate projections: The preparation of the projections will enable the
organization to focus on positive outlooks and also the estimation of the revenues can
be made in an appropriate way. Apart from this, the future unrealistic data are found
to be removed from the projections for providing an appropriate environment.
Question 4
Yes, the sustainability reporting mandatory for the organizations since it helps the
organization to achieve the sustainable global economy. The reporting processes are found to
be enhancing the accountability of the companies as well as the impacts can be easily
mitigated. The enhancement of the trust, as well as the facilities, can be achieved by sharing
the values and also is found to be present in the cohesive society. The availability of the
sustainable information will enable the organization to enhance the position in this
competitive environment and also the issues can be easily mitigated (Burns, 2014). The
changes in the efficient business processes are found to be surrounding the Smart and
sustainable development as well as the inclusive growth of the business will be seen. The
economic environment will be showing the enhancement of the activities which will enable
to gain the appropriate development of the sustainable management and also the positive
impact on the social and the environmental as well as the human right issues can be easily
evident. The transparency can be easily seen in the report as it will enable the organization to
focus on making the changes in the processes which will lead to the development of the
sustainability.
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References
Boylan, M. (2014). Business ethics. Chichester, U.K.: Wiley Blackwell.
Burns, P. (2014). Business Finance. Elsevier Science.
Dlabay, L. and Burrow, J. (2008). Business finance. Mason, Ohio: South-Western.
Mclaney, E. (2017). Business finance. Harlow, United Kingdom: Pearson Education Limited.
Ross, S., Westerfield, R. and Jaffe, J. (2008). Corporate finance. Boston:
McGraw-Hill/Irwin.
Shaw, W. (2017). Business ethics. Boston, MA: Cengage Learning.
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