Profitability is only one factor in the continued success of an organisation. Consider the following scenarios:
1. The Management Team work the staff so hard, don't pay overtime to get the products delivered and meet the financial target to get their bonus - probably result - mass resignations and key staff leave to move to competitors. Not very good start for next years financials is it.
2. The Directors keep profitability high by not doing any Research & Development - possible results - competitors bring out the next new thing, and your sales plummet thereafter. Not good again.
3. The Executive don't hire in new people, have no training or succession programme, and then wonder why after a few key people leave, the organisation is not performing as it was. Just look at what happens to a world record sports team that is kept together for a long time, when the key players leave, the new team just collapses and is never as good and takes years to get back (if they ever do) to their former glory.
4. To keep overheads low Business Development only focus on their existing customer's, don't look for new ones (because of travel restrictions) and don't look at adjacent markets - the result is gradual loss of sales as the company struggles to adapt to the changing market. Not good for long term company survival.
5. Overheads are cut so much that it takes a week to get a pencil out of the stationary cupboard - how much time are your staff wasting on internal bureaucratic processes whilst not doing their day jobs.
The scenarios are trying to illustrate that focus on one area can easily allow complacency into a business, that just breaks down in other neglected areas. Organisations are like delicate machines, they need constant care and attention (even to the little things) otherwise they stop working or become far less efficient.
When identifying the potential of projects, we look atthe yield the best use of human and capital resources to maximize return on investment in the long run, but we need to consider nonfinancial criteria such as researching new technology, public image, ethical position, protection of the environment, core competencies, and strategic fit. Unfortunately, pure financial models fail to include many projects where financial return is impossible to measure and/or other factors are vital to the accept or reject decision.
There are different ways to measure the effectiveness of a human resource strategy. The best way is by looking at the achievement of the objectives of the organization in relation to the strategy.
If an organization starts to become strong, fair and competitive - as well as creating ideas for betterment - change happens. When there is a shift in ideas, tasks, activities or result, change happens.
Data is crucial for organizations as it drives informed decision-making, enabling leaders to identify trends, measure performance, and optimize operations. It enhances customer understanding, allowing for personalized experiences and improved service. Additionally, data supports strategic planning and innovation by providing insights that guide product development and market positioning. Ultimately, leveraging data effectively can lead to competitive advantages and increased profitability.
It is the measure of compatibility between the strategy that the organization has chosen to pursue and the structure of the organization pertaining to implementing the strategy, Is the organization structured properly to implement the strategy? If 'Yes', strategy-structure fit is good.
to what extent does profitability of a firm measure its efficiency
When identifying the potential of projects, we look atthe yield the best use of human and capital resources to maximize return on investment in the long run, but we need to consider nonfinancial criteria such as researching new technology, public image, ethical position, protection of the environment, core competencies, and strategic fit. Unfortunately, pure financial models fail to include many projects where financial return is impossible to measure and/or other factors are vital to the accept or reject decision.
current retio
earnings per share
what tw ratios measure factors
Profitability is an important factor when running a business. Businesses calculate profitability in many ways, but figuring out profits after expenses is their goal. Profitable ratios is a measure of profitability that can be used to assess a business's ability to generate earnings.
An income statement shows the profitability of an entity. Profitability can be a measure that investors and shareholders rely on to make their decisions.
roe
Internal Rate of Return is used in capital budgeting. Its primary purpose is to better measure the profitability of investments and to compare this profitability.
The Return on Assets Indicator or ROA shows the relationship between a company's profits to its actual assets. It is a measure of the company's profitability.
It is necessary to measure the volume with an adequate device or geometrically.
cash in divided by cash out