Performance Measurement



Performance Measurement

Introduction

Financial statement is the important tool for measuring the performance of the organization whether that organization is the international or the multinational company. Through the help of the financial condition of the organization, investor, share holder knows about the investment while the other stakeholder knows about the internal and external situation of the organization. The financial statement of the organization help in evaluating the organizations' profitability, capacity of debt and various risk relate to finance. This study covers the performance measurement, different application of performance measurement, advantage and disadvantage of financial measurement. For this purpose, this study covers the financial analysis of the Google Corporation.

Discussion

Operating Leverage

Operating leverage covers the fixed and variable cost of the organization which means that the operating leverage of the organization emphasis the income statement of the firm. Operating leverage of the firm focuses on the revenue, gross profit margin, net profit margin, earning before income and tax. The organization which makes the high amount of sale then the previous year but have less amount of the profit margin is said to be the less leveraged firm. While, an organization which makes the less amount of sale but have high profit margin is said to be the highly leverage organization.

Same is the case with the fixed and the variable cost which means that an organization with the high amount of fixed cost but incurs the less amount of variable cost. Then the organization is said to be the more operating leverage firm while the organization with the low fixed cost and high variable cost is said to be the less operating leverage firm (Koller, 2010).

ROI (Return on Investment)

ROI is the second application used in the organization for the performance measurement of the financial statement. Return on investment is used for measuring the efficiency of ...