BUSINESS PERFORMANCE – INTRODUCTION

Business performance evaluation can be a very frightening task given its complexity especially when keeping in mind a large company with its various departments and units with their own specific goals. However it might be quite accurate to say that a company cannot survive in today’s market without measuring its business performance. Every market is packed up with a large number of organizations trying to attract as many customers on their side as possible , thus in order to gain competitive advantage over their rivals a company needs to measure its business performance to evaluate how efficient a company is in reaching its goals and satisfying its customers. 

METHODS TO MEASURE PERFORMANCE

Financial

 
One way to measure business performance is to conduct a financial analysis. For this we need financial statements most importantly the balance sheet and the profit and loss statement. These financial statements can be used to calculate ratios mainly those concerning the business’ efficiency, profitability and liquidity. Ratios convert monetary figures into percentages which are then used to compare it with the company’s preceding financial stability or that of other businesses and competitor. Ratios breaks down the complex units into simple percentages which can be then compared analyzed and worked upon respectively. The scope and application of financial analysis is too wide to be written in few words. Financial information can be used to evaluate the assets and liabilities to companies, this also includes how much money the business owes and how much money others owe to the business. A cash flow statement which shows cash paid and received can be analyzed to compare the past and present financial performance of the business and also to keep a check on budget and whether budget forecasts are effective 

SWOT   

Even though financial ratios are very useful they fail to address the non-financial aspects which are just as important. One non financial method of measuring business performance is to conduct a SWOT analysis. SWOT analysis looks into the business Strengths, Weaknesses, Opportunities and Threats. It’s a relatively simple concept however it is quite broad and useful when practically applied. A company which realizes its strengths can focus on it more to toughen it, to know of its weakness beforehand a business can strategically deal with it if the situation arises and can thus overcome threats. Similarly SWOT analysis can help a business to recognize its threats in form of competition from other businesses and develop strategies to gain competitive advantage over them.