Strategic Financial Factors for Achieving Organizational Goals and Performance

Categories: Achieving goals Expectations And Goals Financial Analysis

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In today's world, every organization moves towards achieving its goals and goals to compete with other organizations or even new startups. It is the goal of every profit oriented organization to achieve financial performance, which is viewed as a metric for assessing the effectiveness of management. Every organization must have the ability to coordinate people and resources into strategic tasks to achieve organizational performance, morally and ethically, which ultimately leads to a sustainable competitive advantage. Managers use their financial performance and non-financial performance to assess their capabilities and the overall organization in moving their business towards financial performance by measuring organizational performance.

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Both measurements have been confirmed as significant in illustrating companies’ wellbeing or keep the organization going. However, the extent to which a company is financially successful often determines the tangible benefits of the management giving like bonuses, chances of promotion and other benefits depend on the bottom line of the company. This fact further accentuates the emphasis which is given to making sure that companies’ operations are profitable.

Therefore, a number of factors have been studied in relation to various measurements of financial performance. Numerous ways and theories have been proposed to measure the profitability of the company of financial performance which is liquidity, leverage, asset utilization and firm size.

To survive and prosper in today's highly competitive environment, firms are increasingly engaging in cooperative alliances with their rivals. Therefore, a number of factors have been studied in relation to various measurements. Based on one of read found that leverage ratio which positively affects firm performance is also influenced by conditions that are driven by market forces within the business environment.

Also financial performance aspects with strong emphasis on the factors that are directly related to financial reports of the organization. The organizational factors such as liquidity, leverage, asset utilization, firm size are independent variables. Financial performance is the dependent variable in this study and the selected performance metrics to measure it are the return on assets (ROA) and return on equity (ROE).

The current ratio is the common measure of liquidity. Liquidity is an important factor for the company in the capability of meeting the debt obligations by using the available cash and current assets that can be quickly turned into cash. The current ratio is measured by the current assets to current liabilities, which is recommended to be two is to one (2:1). The ratio of 2:1 shows the ability of the company to convert its assets into cash that can form part of the working capital. This working capital is a critical means towards attaining financial performance for the company. The ability of the company to convert assets into cash is equivalent to its ability to manage the working capital which has to be kept to normal levels to avoid the company in becoming insolvent. The liquid assets are useful for the company in times when external streams of finance to the company are not accessible, or the cost of using external finance is more than resorting to liquid assets to finance its operational expenses and investments.

The most helpful factor in financial risks is leverage. When a organization faces very bad financial obligation, financial risks are not going to pay the debtor but leverage will do. It additionally helps in accomplishing value exchanging. Exchanging on values exists just when the arrival on venture is more prominent than the expense of obligation. Any organization needs money related cash-flow to maintain its business. For most organizations, monetary capital is raised by issuing obligation protections and by selling customary offers. The measure of obligation and value that comprises an organization's capital structure has numerous dangers and ramifications of profits. Along these lines, corporate administration must utilize judicious procedures to make the organization's objective capital structure. Capital structure is the means by which firms account their activities and development utilizing distinctive subsidizing sources. Influence is a significant proportion estimated by all out liabilities to add up to resources, which the organization utilizes obligation in financing resources for the business quest for accomplishing good monetary execution. Value holders treat influence as an option for asserting remaining to support their budgetary exhibition. Research directed without anyone else keep going time on money related influence uncovered a positive profit for value through use of the proportion of absolute obligation to add up to resources. The accompanying recommendation can be inferred.

Asset utilization is one of important factors that we couldn't deny it when comes to improving organizational performance. As an organization's factor in determining the company's financial performance is based on the clarification of assets that are essential for the production process or service required to drive financial performance. Asset consideration is important to identify and measure the different capabilities and functions of these assets owned by the company in ensuring financial performance (Ellis, 1998). When assets are not used effectively and effectively, they lead to weak financial performance such as loss in revenue collection from investments. Based on my research on fixed asset investments and their relationship to company profits shows a positive relationship between the two variables. Although based on a review of my other business partners research shows that their research to test the importance of achieving business performance than the optimal allocation of asset structures and statistical tests has shown significant correlation.

Last financial factors that contributing into organizational performance is firm size. Here we not meaning to how big is the companies building or the surrounding but the market share or market power they having within ither competitiors. It is proven that due to high market power, firms can charge more expensive rates for their products and services in the market. Also, high benefit of the firm can be the aftereffect of the economies of size of good arranging intensity of the firm with the providers. Besides, Numerous researchers considered the connection between the size of the firm and the money related returns emerging from it, for example an exact examination directed by Vijayakumar and Tamizhselvan (2010) essentially demonstrated that there is a positive connection between the size of the firm and monetary execution. The investigation concentrated on the benefit part of the money related execution and found that enormous business firms have assets and ability to make a benefit for the long haul contrasted with the capacities of little firms that are a greater amount of short to medium term in effectuating productivity. In view of Lee (2009) likewise analyzed the wellsprings of firms' productivity and the examination uncovered that one of the key wellsprings of gainfulness was the size of the business firm, which decidedly impacted and assumes a significant job in opening surges of money inflows and execution by and large. The vast majority of the above investigations were led in the assembling ventures; in any case, there are likenesses between assembling firms and that in the administration business. An investigation led in the administration business tried size-benefit linkage by Amato and Burson (2007) found that any firm paying little mind to the size it can achieve productivity.

Concluding that in every organization the managers and top management are responsible for making decisions which are expected to move their organizations towards goals and objectives attainment. The any decision takes by orgnization plays an important role in further aligning and determining the long-term objectives of the firm which may be critical to the success of the company. Hence, there is a strong need for the formulation of the specific model that addresses the relationship between organizational linkages and firm performance which are the factors including market share position, firm size, asset utilization, leverage and liquidity as discussed. It is a strategic move by managers to leverage on company assets and effective organization and management of people and asset utilization in increasing the size of the firm. Above all the important factors discussed, the effective and efficient management and the organization is by drive the business firm towards its goals and objectives. Apart from all the financial factors that has been discussed but organization also must open to newcomers or even experience staff to give them a chance to provide any idea that will definitely brings up the organization performance to next level.