The CEO of the parent company agrees with numerous practitioners who promote the use of nonfinancial measures as well as financial measurements to evaluate the performance of a given firm. Nevertheless, Tony agrees that nonfinancial measurements can be valuable, and he tends to support the premise that when evaluating operating performance, benchmarking competitors, and comparing industry results, nonfinancial measurements have little measurable value.
Tony has asked you to present a position paper comparing the effectiveness and reliability of using financial measures as opposed to nonfinancial measures:
- Provide an analysis of the utilization of assets in terms of efficiency (or inefficiency).
- What are measurements associated with returns and activity ratios?
- Explain why you selected each specific measurement.
- Then, review the electronic equipment industry using financial ratios.
- Assess the firm's operating performance against these ratios.
- Research the financial reports of one company in the electronic equipment industry, and compare it with the performance of Electronic Equipment Venture.
- Include an Excel spreadsheet to support your analysis.
- Use this information to support your position and compare the effectiveness and reliability of using financial measures as opposed to nonfinancial measures