THE USE OF FINANCIAL RATIO ANALYSIS AS A MEASURE OF ORGANISATIONAL PERFORMANCE
CHAPTER ONE
INTRODUCTION
1.1 Background of the Study
Performance measurement serves as a source of information about financial outcomes and the internal operations shown in an organization’s financial statements. Effective performance measurement is key in ensuring that an organization’s strategy is successfully implemented. It is about monitoring its own predetermined goals or stakeholders requirements (CIMA, 2008). Performance measurement is a very important aspect of business activities. The purpose of measuring performance is not only to know how a business is performing but also to enable that business perform better. It helps to improve the performance of an organization so that it may better serve its customers, employees, owners and stakeholders. A performance measurement system enables an enterprise to plan, measure, and control its performance according to a pre-defined strategy. Performance measurement can be financial or non-financial. Horngren, Datar and Foster (2006) note that many organizations are increasingly presenting financial and non-financial performance measures for their subunits in a single report called Balance Scorecard. Different Organizations stress different measures in