“In business, words are words, explanations are explanations, promises are promises, but only performance is reality.” – Harold S. Geneen
Every business wants to survive in the market, the sustainable development and continue its profitability while improving its overall performance. Time and again, it is important to assess the performance of a business, so that the actual position of a business may be identified, its profitability may be determined and the solutions may be proposed in case there are bottlenecks that hinder success of a business. Assessing business performance involves several methods. Some of them are mentioned below.
Business performance is a combination of management and analytic processes that allows managers of an organization to achieve pre-determined goals.
One of the most important things that’s done In order to determine the performance of the employees, performance evaluation and development plans are arranged. It is through this process, the performance of the employees may be evaluated by defining certain key performance areas and key indicators. This would lead to direct the employees towards attaining their objectives. A constant evaluation is made, so that employees may get motivated and perform their duties in a way as has been expected of.
Financial Statements of a business entity have a great value and significance to provide financial information through which the performance in terms of profitability as well as financial position may be known. In this way, profit and loss statement or Income statement provides related information during a particular period through which it may be identified whether the business generates profitability or bears losses. As regards balance sheet information, it is of obvious importance as well, it discloses the information about the financial position of a business at a particular date. It shows the position of assets and liabilities as well as the owner’s equity.
Besides, financial analysis is made to assess business performance and consider various aspects of a business. Financial analysis demands various tools and techniques to take several aspects of a business into consideration. This will lead to prepare Cash Flow Statement, comparative financial statements, common size financial statements etc.
The process of financial analysis also involves calculating various ratios. Ratio analysis plays an important role in determining business performance. Various ratios are applied and calculated, so that the related information may be drawn. Just to name a few ratios are: Acid test ratio, current ratio, profitability ratio etc.
It is important to note that assessing business performance regularly leads a business to the desired success. It also enables to determine the factors that impede the progress of a business.
K. A. Fareed (Fareed Siddiqui)
Writer, Trainer, Author, Blogger, Software Developer
BBA, MBA-Finance, MPhil-Financial Management, (PhD-Management)
Post Graduate Diploma in Computer Applications and Programming
Certificate course in English language proficiency
Level 1 – Leadership and Management ILM – UK
Individual Member of Institute of Management Consultants of India