Question

If I worked as the manager of the Shoe Department at the local Sears store, how should my financial success be measured, in your opinion?

Answer 1

To Measure financial performance in any entity we need to consider several aspects.

Mesurement of financial performance is important for any entity.many businesses fail because of poor financial management and planning.

If i work as a manager mainly to consider first of all is Planning and execution/implemetation of required strategies.

A good planning and failed in implementation is of no use. in some cases poor plannning ang well executed in implementation results in best performance.

1) financial performance review : mainly we have to review the fianancial performnace

Financial performance review can help you examine your business goals and plan effectively for improving the business. for this we need to consider

i)cash flow

ii)workng capital

iii)cost base

iv)borrowing

After proper planning of the above we have to measure th efinancial performance

FINANCIAL PERFORMANCE MEASURES

one of the most important areas you must review is profitability. most growing and every company targets mainly in profitability

mainly profitability is measured by following

Profitability Ratio:it is th eratio whch measures return or earnings on their investmenst.

i)Gross profit margin

ii) operating expenses margin

iii)net profit margin

iv)return on capital employed

By properly maintaining the above ratios with industry average ratios and standard ratio. we can mesasure the financial performance for its growth and survival.

Generally performance can also be measured by accounting ratios

i)liquuidity: it refers to assessing the ability to meet its short term financial obligations

ii)solvency: measuring your long-term debt against your assets and equity to determine your financial stability

iii)efficeiency :  measuring things like stock turnover to determine how well you are using your business assets

By measuring the above ratios with industry averages and standard average ratios,previous year ratios, competitor ratios helps to identify the problems in your business.

Therefore i may follow above all protocols for measuring the performance.