Performance Management

The utilization rate is the working efficiency of an organization. It tells a company how efficiently its employees are working in terms of available working hours. Calculating the utilization rate is easy and can be used to derive the profitability of a company. Let us discuss what is utilization rate and how to calculate it. […]

Realization rate is the ratio of your worked hours against your paid hours. It means it is the difference between the time worked on a project against the time you get paid for. It is a simple percentage term that indicates how much a company is earning against its worked hours. It can be used

Businesses are run by sales. Days inventory outstanding is a measure that tells how quickly a business is turning its inventory into sales. Days inventory outstanding (DIO) is an important working capital ratio. It also shows the operating efficiency and short-term liquidity positions of a company. Let us discuss what is a DIO ratio, how

Days sales outstanding is defined in several ways. However, the simplest way to understand DSO is the days a company takes to collect the payment after purchasing an order. The more limited the DSO, the quicker the organization gathers installment or pending payment from its clients – and the sooner it can utilize its money.

Budget padding aims to inflate the proposed budget; it can be done by artificially increasing estimates that favor managers. This results in the room to cover unexpected expenses the business may have to face during the project. Artificial increment/budget padding can be perceived as unethical, but sometimes it’s logical in times of inflation when there

Definition The current ratio measures the ability of the business to pay off short-term obligations falling due in the next twelve months. Calculation and analysis of the current ratio help to assess the liquidity of the business and offers great help in understanding if the business is liquid and able to meet the commitments in

Financial statements contain four reports that provide valuable insights into a company’s operations. The first of these is the balance sheet, which includes various account balances. Similarly, the second is the income statement, detailing a company’s financial performance. They also consist of the cash flow statement, which contains cash transactions during the year. Lastly, they

Companies and businesses depend on cash flows to operate efficiently. These cash flows arise from several sources and also go into many more. Although profits are an essential metric to measure a company’s success, cash flows also play a critical role. Companies that suffer from poor cash flow management don’t survive for long despite being

The net worth of a company is what is left for the shareholders after settling all obligations. It can be termed as net assets of a company after adjusting for all types of liabilities. Return on net worth is the ratio that links the net income with the net shareholders’ equity. This figure closely resembles

Target profit is the desired profit that a business wants to achieve in an accounting or manufacturing period. The conventional approach is to set budgets and compare results against standards. A comprehensive approach to follow is the cost-volume-profit analysis. The target profit calculation is an integral part of the CVP analysis. Let us discuss this