Essay on A Vital Part Of Owning A Business Is Managing The Performance Of The Business

Submitted By shyboy246
Words: 337
Pages: 2

A vital part of owning a Business is managing the performance of the Business. A vital part of assessing the performance of your Business is by the use of Benchmark Analysis. Industry benchmarking allows for the evaluation of your business’s financial and operational performance in relation to a specific group of your peers (companies of similar size and scope operating within your industry). Benchmark Analysis is the process of comparing the performance of your business to that of similar businesses. It is only after such analysis that you can properly understand where your business is performing well and where it is underperforming. Once you have this information you can ‘make informed decisions’ about where the best opportunities are to improve the performance of your business. When Benchmark Analysis is coupled with Trend Analysis you are able to really understand how your business is performing and, importantly, you can identify worrying trends BEFORE they become a problem for your business. Trend analysis helps a firm's financial manager determine how the firm is likely to perform over time. Trend analysis is based on historical data from the firm's financial statements and forecasted data. One popular way of doing trend analysis is by using financial ratio analysis. If you calculate financial ratios for a business firm, you have to calculate at least two years of ratios in order for them to mean anything. Ratios are meaningless unless you have something to compare…