Explain Why an Organization Should Not Use Only Financial Measures

question 60

Essay

Explain why an organization should not use only financial measures to monitor performance.

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Definitions:

Sustainable Growth Rate

The maximum rate at which a company can grow its sales and earnings without increasing leverage or debt financing.

Leverage Ratios

Financial metrics that assess the level of debt in a company's capital structure relative to its equity or assets.

Dividend Policy

A company's approach to distributing profits back to its shareholders, whether through cash dividends, stock dividends, or share repurchase plans.

Sales Forecasts

Sales Forecasts predict the amount of product or service a company expects to sell over a specific period, aiding in planning and budgeting.