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Chapter 8

Financial performance measurement

2.1 Introduction

 Financial performance measures are used to measure the
performance of the whole organisation, its divisions (Chapter 9)
and key projects.

 The numerical measures are of little use in isolation and need to
be compared with, for example, a previous period, a competitor as
a benchmark, an industry average or a target.

 Financial performance can be assessed in terms of profitability,
liquidity and risk.

 The examiner expects a critical approach:

– calculating the most appropriate ratios only and

– with a focus on performance management advice based on
the calculations done.

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