please respond to the following discussion post as a peer making a comment on the current discussion. Hi everyone,
Hope you are having a great weekend so far. Starting off, metrics relating to the financial industry may also be referred to as key performance indicators (KPIs). A financial health metric refers to a means by which an organization can be able to track, measure, and analyze the financial health of their company. A variety of financial metrics can be classified under a variety of categories, such as financial leverage, credit quality, efficiency, and valuation. As an example, the net profit margin can be thought of as a financial metric. There is a measurement of the profitability of a business when it is measured against revenue and other income after deducting all the costs associated with the business, including the cost of goods sold, operating expenses, interest, and taxes that apply to the business. In contrast to gross profit margin, net profit margin is used as a measure of the profitability of a business in general, taking into account not only the cost of goods sold, but all other expenses that are related to the business. A non-financial metric that can be used to evaluate a company’s performance is customer retention and The retention rate of an organization is determined by the number of clients who remain loyal to the company, while the churn rate represents the number of existing clients who no longer rely on the company. Metrics measured from both a financial and non-financial perspective can be used to determine the success or failure of the business on both these fronts. Nonfinancial measures, on the other hand, are nonmonetary in nature, for example employee engagement and customer satisfaction, which are nonfinancial measures focused primarily on nonfinancial aspects such as profits, costs, and revenue. The importance of incorporating both types of metrics cannot be overstated, since non-financial indicators are sometimes a good indicator of the financial performance of the company. There should be a direct relationship between good indicators in non-financial metrics and good indicators in financial metrics. In short, the purpose of financial metrics is to measure a company’s ability to convert nonfinancial performance into financial goals; therefore, in order to maximize efficiency, both metrics should be combined together.
Reference:
Grigoroudis, E., Orfanoudaki, E., & Zopounidis, C. (2012). Strategic performance measurement in a healthcare organization: A multiple criteria approach based on balanced scorecard. Omega, 40(1), 104-119.
https://www.sciencedirect.com/science/article/pii/S030504831100612
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