Financial Goals
Company’s Perspective Of Financial Goals, Reasons and Effects
The Financial Perspective examines if the company’s strategy will contribute to the bottom-line improvement of the company. The Financial Perspective represents the long-term strategic objectives of the organization and thus it incorporates the tangible outcomes of the strategy in traditional financial terms. The Financial performance is a lag indicator and provides the ultimate definition of an organization’s success and describes how to create growth in the shareholder value. Depending on strategy, leaders of the organization follow a combination of growth strategy (i.e., to increase revenues) combined with varying emphasis on productivity strategy (i.e., to cut costs through efficiency). Some of the most common financial measures that are incorporated in the financial perspective are EVA, revenue growth, costs, profit margins, cash flow, net operating income.
The introduction of the balanced scorecard emphasized financial performance as one of the key indicators of a firm’s success and helped to link strategic goals to performance and provide timely, useful information to facilitate strategic and operational control decisions. This has led to the role of finance in the strategic planning process becoming more relevant than ever.
Empirical studies have shown that a vast majority of corporate strategies fail during execution. The above financial metrics help firms implement and monitor their strategies with specific, industry-related, and measurable financial goals, strengthening the organization’s capabilities with hard-to-imitate and non-substitutable competencies. They create sustainable competitive advantages that maximize a firm’s value, the main objective of all stakeholders.
The main goal for most businesses is to earn a profit. Generating profits in a business environment often indicates that an organization is offering goods or services desired by consumers at a reasonable price.
The Financial Perspective examines if the company’s strategy will contribute to the bottom-line improvement of the company. The Financial Perspective represents the long-term strategic objectives of the organization and thus it incorporates the tangible outcomes of the strategy in traditional financial terms. The Financial performance is a lag indicator and provides the ultimate definition of an organization’s success and describes how to create growth in the shareholder value. Depending on strategy, leaders of the organization follow a combination of growth strategy (i.e., to increase revenues) combined with varying emphasis on productivity strategy (i.e., to cut costs through efficiency). Some of the most common financial measures that are incorporated in the financial perspective are EVA, revenue growth, costs, profit margins, cash flow, net operating income.
The introduction of the balanced scorecard emphasized financial performance as one of the key indicators of a firm’s success and helped to link strategic goals to performance and provide timely, useful information to facilitate strategic and operational control decisions. This has led to the role of finance in the strategic planning process becoming more relevant than ever.
Empirical studies have shown that a vast majority of corporate strategies fail during execution. The above financial metrics help firms implement and monitor their strategies with specific, industry-related, and measurable financial goals, strengthening the organization’s capabilities with hard-to-imitate and non-substitutable competencies. They create sustainable competitive advantages that maximize a firm’s value, the main objective of all stakeholders.
The main goal for most businesses is to earn a profit. Generating profits in a business environment often indicates that an organization is offering goods or services desired by consumers at a reasonable price.