FINANCIAL MANAGEMENT: THE IMPACT OF PERFORMANCE INDICATORS ON THE ORGANIZATIONAL PROFITABILITY

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Abstract

This paper investigates the financial management performance involved in increasing the firms’ profitability. It contributes to a single list of performance indicators which never existed in the literature empirically with reference to third world countries, like Pakistan. Stratified random sampling technique was used to select a sample of 200 manufacturing firms with process performance management system (PPMS) criteria to check the impact of performance indicators on the overall business performance index using ROE, ROA. The results of AHP analysis show that the “Supportive Culture” and “PPMS facilitate the competitive advantage” are the major facilitators for those organizations who have implemented the PPMS whereas firms without implementation of PPMS have major inhibitors as “ Non supportive culture” and ”Have another Performance System”. And the Measuring financial performance, Quality performance, Delivery reliability performance, customer satisfaction performance and employees satisfaction lead to increase in the organizational Profitability. This study will be helpful to the top management of the organizations from manufacturing sector regarding the implementing decision of the PPMS. The organization can choose the best indicators used by firms in order to achieve the overall excellence.

Keywords: Profitability, ROA, ROE, ANOVA, Key Indicators, Critical Factors

How to cite this paper: Awan, H.M., Bhatti, M.I., Razaq, Z. (2015). Financial management: The impact of performance indicators on the organizational profitability. Corporate Ownership & Control, 13(1), 84-96. https://doi.org/10.22495/cocv13i1p9