Question

E14.21 LO14.1 14.2 Financial and non-financial measures Classify each of the following statements as true or false. In each case give reasons for your answer. 1 Non-financial performance measures provide essential information in order to assist managers at the operational level to take actions to correct problems, 2 Financial measures assist managers to manage the drivers of future financial performance. 3 Both financial and non-financial measures can assist in communicating the strategy of the business and in encouraging goal congruence. 4 Non-financial measures provide an indication of how well the organisation has performed across a range of strategically important areas. lalalarmance measures service firm

Answer 1

1. True

Non-financial measures are equal important measure like financial measure for taking decision at operational level. For example : brand image, impact on employees, reputation of the firm, etc are some of the non –financial measures to be considered in decisions like Make vs. buy . Hence answer is true

2. True

Financial measures help the managers in understanding and managing the drivers of future financial performance. For example: conversion cost target, capex implementation, etc. The firm can set financial measures target and can regularly monitor them to ensure actual results are in line with the targets set.

3. True

A firm having a strategy sets its target in terms of financial and non financial measures since both are equally important. Financial measures are like Sales revenue target, net profit target, etc; Non financial measures can be like on time delivery, Quality complaints resolved etc.

4. True

Non-financial measures indicate how organisation has performed will in its strategy implementation. For example: Market share in each respective category, Introduction of new products in the market, etc. Hence non-financial measures are equally important and should be monitored by the organisation. It helps in gaining competitive strategic advantage.