JULIANA FERRIGHETTO

EVALUATE BUSINESS PERFORMANCE -FNSACC607

TASK 2

DEVELOP MEASURABLE PERFORMANCE GOALS

The Financial Performance Analysis is a set of reports and studies of the

Financial Management of a company, which is responsible for evaluating the
operating results of that company. In this way, the financial performance
analysis is able to accurately inform the quality of the service and the economic

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balance of the activities. Thus, it is possible to devise new, more efficient

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strategies according to what the company needs. It is worth noting that with well

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done studies carried out in the analysis, the indicators may include, even, the

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verification of the global financial health of a company in comparison with other
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companies. similar. The basic items of an income statement are cash flow from
operations, net income, among other financial balance sheet data. In addition,
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analysts may also use other important data such as profit margins, growth rates
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or debt ratios.
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To develop a complete analysis, the financial manager or analyst responsible

for the study needs to raise a series of indicators to be analyzed that are divided
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into four categories. Understand:

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Activity indicators
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In this category, the following are evaluated: cash flow; inventory turnover and
cash flow.

Capital structure indicators

In the segment are analyzed: Total indebtedness and interest coverage.

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 Liquidity indicators

In the category are evaluated: current liquidity; dry liquidity; immediate liquidity;
general liquidity.

Profitability indicators

The following are analyzed: operating margin; net margin; EBITDA margin;
return on investments and return on equity.

KPIS

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The performance indicators are for a company to visualize the performance of

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each sector, as a way to follow the objectives outlined by the strategic planning,

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analyzing what has already been achieved and what needs to be adjusted to

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achieve the goals.
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The development of an organization can be strongly influenced by the
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demonstration of these indicators, which must be used in the different activities

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that add value to the business. With these analyzes, it is also possible to know
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the points of improvement, necessary in each process.

For these performance indicators to make a significant contribution to

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controlling the company, it is first necessary to understand strategic planning

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and have clear objectives when defining the goals that must be achieved. From
there, the development and management of performance indicators can be
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directed towards monitoring the evolution of the company's results and serving
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as a reference for the decision-making process and the creation of improvement

strategies.

CRITICAL TARGET AREAS

SALES

The sales performance targets are to increase the number of online searches
and thereby increase revenue from online sales, as well as expand other
territories through online furniture sales. In addition, it will be necessary to

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 create goals and marketing strategies to guarantee competition in relation to
new companies abroad.

Sales KPIs:

Customer Acquisition Cost (CAC)

The customer's acquisition cost reveals the value you invest to win new
customers for your company. It is very important to analyze the CAC, because
with it you get to know exactly the cash value that you “spend” with prospecting
until the acquisition of new customers.

Average ticket

The average ticket is the indicator that shows the average spend per sale, it is

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one of the main indicators because it is linked to the company's revenues. It is

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important to monitor the average ticket to outline strategies that can increase it

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when necessary. rs e
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To increase the average ticket there are several strategies, such as, for
example, progressive discounting, which is a good option, as it is an incentive
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for the consumer to buy in larger quantities. And other strategies that are also
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used more frequently, such as product combo or free shipping from a certain
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value.

Conversion rate
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The conversion rate is obtained based on the opportunities generated and

those that actually converted into sales, in this way, it makes it possible to
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identify the efficiency of your sales team. The analysis of the conversion rate
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has its importance because it makes it possible to identify the best strategies
and actions that must be taken by the sales team.

Follow Up Rate

In many businesses, sales are not made on the first contact, it is usually
necessary to make new follow-up contacts (send e-mail, call, visit) to be able to
find the ideal time to make the sale with your customer. What happens is that
many of the deals are not closed because the salespeople are unable to follow
up properly with the prospective contact, the lack of persistence and discipline

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 of the salespeople, who sometimes abandon a possible customer ends up
being one of the causes.

Sales Cycle

The sales cycle is the time it takes for a sale to take effect from the first contact
with the customer. Based on this indicator, it is possible to identify whether your
company's sales cycle is long, medium or short and, thus, develop actions to
perform your sales team and improve your company's sales cycle.

Shorter cycles allow companies to close sales more quickly. If the cycle starts to
increase, it is necessary to identify the reason, some if Marketing itself needs to
review its strategies

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ASSET TURNOVER

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Knowing the turnover of the company's assets is extremely important. This is

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because this index allows to measure the efficiency of the use of an
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organization's assets to generate revenues and profits. The asset turnover is an
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accounting parameter that links the total sales produced with the company's
assets to its net revenue. one of its main functions is to show companies how
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their assets have been used throughout the year. In this way, the target for the
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performance of asset turnover can be achieved by increasing sales over the

periods. It can be achieved in 1, 2, 3 years. The company's net revenue tends
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to increase with the investment of new activities and consumer adherence.

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Asset KPI

Turnover rate
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A very high turnover indicates that there is a problem in the company's

performance in general, which increases costs with selection processes and
project continuity. Generally, the higher this index, the greater the need for
appreciation and motivation programs.

Availability - Availability factor

relationship between the difference in the number of hours considered (calendar

hours or hours of effective operation) with the sum of the number of hours of

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 intervention by maintenance personnel and hours of waiting for each observed
asset and the total number of hours in the period considered.

Maintenance cost per billing

relationship between the total maintenance cost and the company's gross
revenue in the period considered.

PROJECTED REVENUE

The targets for revenues depend heavily on a budget forecast that must be
made for the 2015 financial year, based on the growing and demand for sales.
Some external factors can influence how the inflation rate that once projected
can indicate price volatility. The projection of revenues is fundamental in

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determining expenses, as it is the basis for fixing them in the Annual Budget

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Law, in the execution of the budget and for the determination of the

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Government's financing needs. In addition, it is essential to analyze the granting

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of supplementary and special credits for excess collection.
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Revenue KPIs
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Revenues
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Billing is one of the most relevant financial KPIs for running a business. In short,
it indicates how much the company is selling and the amount it represents in
cash. The best way to use this indicator for analysis and action is to compare
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the actual revenue with what was previously planned.

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Profitability
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Through the profitability indicator, entrepreneurs are able to better understand

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the risk of their business. Calculating the percentage of profit on billing can also
indicate whether total costs are high or not.

There are many businesses that manage to earn good monthly revenue, but do
not have capital available at the end of each month. If the billing needs to be
very high for profitability to be acceptable, it is a sign that the risk of the
business is high and the manager must review its costs.

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 Receipts

As billing is not a guarantee of receipt, it is possible for a company to reach high

values of gross revenue, but it is not able to receive this amount in its entirety.
This happens when entrepreneurs sell installments and suffer from default, for
example. This account shows the average time it takes the company to receive
payments within a year. High results show that customers take a long time to
make payment.

Profitability

Profitability presents the return that an investment provides to the company. It is

also used to check whether a project or initiative has the capacity to generate

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profits. A good example of this is the increase in revenue that a new marketing

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campaign can cause.

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CAPITAL EXPEDITURE MANAGEMENT

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Expenses related to the acquisition of machinery, equipment, construction work,
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acquisition of shareholdings in companies, acquisition of real estate, granting of
investment loans. Normally, a capital expenditure contributes to the formation of
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a capital asset, as well as to the expansion of the agency's activities. In view of

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this, the performance goal is that the expenses also increase proportionally the
sales, since it counts in addition to the operational expenses, the expenses of
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investments in the company, so that the organization can implement strategies

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and innovation. In addition, an increase of 2.5% in the cost of loans and an

increase in inflation was calculated, which makes raw materials more expensive
and the financing of certain activities increases interest rates.
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Expenditure KPIs

Current liquidity

Current liquidity is an indicator that reveals the company's ability to meet its
short-term obligations.

Break-even point

The break-even point indicates the moment when the company's net revenue is
exactly equal to the sum of costs and expenses, that is, net profit equal to zero.

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 It is used to calculate how much the company needs to sell to finance its
operations without any loss.

RATE OF RETURN ON INVESTMENT

It is a very common term in the analysis of investments, being used mainly to

identify financial returns, both potential and past. The ROI metric shows,
through a rate of return, how much an investor has gained (or lost) in relation to
the amount invested in a given investment, while giving an analysis of what
happened and a perspective on the future of the same .

ROI is a parameter used to analyze the return on any type of investment - be it

a technological research project, a marketing campaign, the purchase of a new

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machine or the acquisition of a new fixed income security for your investment

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portfolio It is for the ROI of an activity that investors tend to look at when

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evaluating the possibility of going ahead with the investment process. Because

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from the point of view of the owner of the capital, it is essential to know how
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much he will earn in income to cover everything that has been invested. As a
performance goal, a lower ROI is expected compared to other years, due to the
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insertion of new companies in the industry, increased operating expenses and

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expenses, inflated economic instability, and also the trend and demand of
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consumers for new furniture designs.

Return on investment KPIs

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Not every lead that has a high acquisition cost should be considered a waste of
money. It matters a lot more how much this lead will generate profit. To calculate
the ROI, just:
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The billing of the action that will be analyzed;

The costs generated by this action;

Then, just lower the cost billing and divide that amount by the cost. The result
will be the value of your ROI.

REFERENCES

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 Floridatechonline.com. (2020). [online] Available at:
https://www.floridatechonline.com/blog/business/key-performance-indicators-in-
project-management/.

Kenton, W. (2019). Capital Expenditures: What You Need to Know. [online]

Investopedia. Available at:
https://www.investopedia.com/terms/c/capitalexpenditure.asp.

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