Performance Measurement Flashcards
two types of performance measurement
financial and non financial
3 areas for analysis
gearing
profitability
liquidity
4 types of company performance assessment
ratio analysis
review of the accounts
review of benefits from POV of stakeholders
analysis of financial and non financial info from external sources
how can you compare performance assessment
with other companies
industry averages
Over time
formula for ROCE
( Profit before interest and tax / capital employed ) x 100%
formula for capital employed
total assets - current liabilities
what has happened for a ROCE to be static or decreasing
reduced profit margins or reduced asset turnover
formula for asset turnover
sales / (total assets - current liabilities)
definition of liquidity
the amount of cash a company can obtain quickly to settle debt
formula for inventory period
average finished goods / cost of sales x 365
formula for receivables period
average receivables / credit sales x 365
formula for payables period
average payables / credit purchases x 365
formula for gearing
long term debt / long term debt + equity
formula for operating gearing
contribution / profit before interest and tax
limitations of ratios
not useful on their own, need to be compared
inflation needs to be adjusted for
different basis calculating between companies
