Performance Indicators, Reporting, and Assessment
Financial executives and other senior management officials must have the skills to carefully, thoroughly, and accurately assess corporate financial and operational performance. Accordingly, the expected outcomes for this week are associated with demonstrating proficiency with creation, analysis, and interpretation of financial statements, ratios, and other performance indicators.
A principal expected outcome for the week is to become proficient with the calculation and use of the traditional financial and operational ratios to assess liquidity, profitability, capitalization, management effectiveness, and market value.
Explain why the principal values of calculating financial ratios are to make comparisons over time and to develop comparisons with other companies.
Additional outcomes include the ability to explain the use of common-size financial statements, how to prepare an integrated ratio analysis, and to acquire an understanding of the principal challenges of ratio analysis.
Becoming familiar with and learning how to calculate and use value-based or economic value-added measures of performance (EVA, MVA, CFROI, SVA, CVA, and REVA) are important outcomes this week. These measures are often used in addition to the traditional financial and operational ratios that are used to examine company performance.
Another important objective is to understand the 4 C's of credit analysis or factors to consider in corporate credit analysis. It is useful to understand how creditors use these indicators in the process of making credit decisions.
Observation:
For a video presentation about EVA and MVA including an interview with Joel Stern (of Stern-Stuart, the developers of the EVA and MVA measures), visit:
https://www.youtube.com/watch?v=ZCaeMTSTWYs