Question

Discuss five of the advantages that nonfinancial performance measures have over financial performance measures using examples

Answer 1

Five advantages are

1) long term prospect :

The financial performance measures usually are short term focused as to one year or two, but the non financial measures are for long term decision making.

For example the customers' preference, the upcoming trend in society provide much .long prospect than financial measursm. If we know one product will soon ve relaced by another in market, the good financials can also not help it to survive.

2 Consider intangible assets

Financial measures usually ignore the intangible assets. The non financial measures take these assets under consideration thus, helping in making more precise decisions.

For example the benefit to company due to it's goodwill.

3 Better indicators of financial results

The non financial measures are better indicators of financial measures.

Example: the changing taste of customers to the product of competitor will be non financial measure but will tell the trend of downfall in financial results.

4 Can help in more satisfaction of customers

Since the financial measures give to earning more finance but the non financial help to find way to satisfaction of customers. In today's world a company cannot earn profits if it's customers are not satisfied.

For example: if a company has achieved it's saless target the financial measure will be met but the non financial will also tend to ensure tht each customer is satisfied.

5 Non financial measures have more capability of bringing change in the working of an Enterprise.

For example if one comapcois having very good finnacial results receives an information as the product sold by them is banned in market, it's finnacial measures will be of no use, this only information is enough to shut down the company.