Question

The top managers of an organization typically use a variety of financial indicators to assess the performance of their organizations. Discuss the major types of financial measures and describe when each would be chosen by management.

Answer 1

Answer:

Four significant types of financial measures are :-  

1. Profitability or re-turn on investment :- rate of profitability is utilized by the top administrator to know the increase or profit for the speculation comparative with the measure of cash contributed. This is likewise utilized by the supervisor to know the gross productivity, net benefit, return on resources, rate of profitability, gaining per share, speculation turnover and deals per representative.  

2. Liquidity ratio :- liquidity proportion is utilized by the top chief to realize the organization's capacity to pay its present commitment. organization's liquidity proportion incorporates current proportion, speedy proportion, money to add up to resource, deal to receivable, Days' receivables proportion, Cost of deals to payable, and money turnover.  

3. Leverage ratio:- Leverage ratio is utilized by the chief to know the solvency of the organization. Influence incorporates Debt to value proportion, Debt proportion, Fixed to worth proportion, and Interest inclusion.  

4. Efficiency ratio - productivity proportion is utilized by the top supervisor to gauge the organization's capacity to utilize its assets and oversee liabilities successfully for the time being. It incorporates Annual stock turnover, Inventory holding period, Inventory to resources proportion Inventory/Total Assets, Accounts receivable turnover Net (credit) Sales/Average Accounts Receivable and Collection period 365/Accounts Receivable Turnover