The Dimension of Business Growth Essay

1799 Words Mar 9th, 2014 8 Pages
The Dimension of Business Growth

The Process of Growth

Four Perspectives:

1. Financial Growth-relates to the development of the business as a commercial entity. 2. Strategic Growth-changes that take place in the way in which organization interacts with its environment. 3. Structural Growth-changes in the way the business organizes its internal systems. 4. Organizational Growth-changes in the organization’s processes, culture, and attitudes as it grows and develops.

Financial Analysis

The Balance Sheet-structure of financial reporting shows the assets and liabilities of the firm as being equal.

The Profit and Loss Account-provides a summary of the revenues obtained as a result of trading activity over the
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a. Solvency Ratio-debt ratio represents the capital structure of the firm. b. Liquidity Ratio-concerned with short-term liabilities. * Current Ratio-ratio of current assets to current liabilities. * Acid Test Ratio-straight measure of a firm’s ability to pay its short-term creditors immediately from its liquid assets.

3. Stock Market Ratio a. Earnings per Share-profits potentially available for each share that has been issued. b. Price/Earnings Ratio-ratio of the price at which a share in the business is trading on the stock market to the earnings per share. c. Dividend Yield-represents the payment made to investors on each share as a proportion of the market value of the share. d. Dividend cover-indicate the division of available profits by management between passing them to shareholders and retaining them within the business for future investment.

Financial Growth

1. The Underlying performance (Return on Investment) of the Venture * Investors will be interested in the performance of the venture not just in absolute terms but relative to their expectations of that performance. 2. The Growth in the value of the Venture * Growth in income, assets and capital are equally important. a. Changes in turnover b. Changes in cash profits c. Changes in tangible assets d. Changes in total assets e. Changes in shareholder’s capital * Expansion of the venture

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