MZUMBE of time normally a year. Users of financial




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1.1  Introduction

Management performance means
achievements or outcomes achieved in relation to organizational goals set. How
successful the management has achieved the organizational objectives which are
therefore involves a clear evaluation of performance.

1.2  Financial Performance Measures

Financial performance is the
achievements or outcomes achieved in relation to monetary/economic terms. In
evaluating the financial performance, users are normally intended to analyze
the financial health of the organization for a specified period of time normally
a year. Users of financial information may have different perspectives in
evaluating the financial performance of the company, but the most common
financial measures specific to profitability includes;

Profit Margin- this measures how well the company is
able to generate profit and producing at low cost as it involves money earned
after deducting the cost of sales (direct cost).  

Profit Margin- this measures the organizational
strength on generating profit after deducting all cost relating to production
also associated cost for bring the product to the market.

on Capital Employed- it is the most common measure used to
analyze the profitable investments, as it influence on investors’ decision in
analyzing a profitable investment among alternatives.

on Asset- this measures how the company is able to utilize the
asset to generate profit as it includes net income with total assets of the

The measures above
comprises the profit generated from operations, and the profit itself is
realized after deducting all cost in all level, it is therefore worthy to
classify it as cost measures as well.

1.3  Non-financial Performance Measures

Studies have been conducted on the
contribution non financial measures to organizational performance, with other
researchers argues that this measures have a significant impact on firm
performance while other still believing on the traditional approach. But
studies supporting this approach have recognizing the significant impacts made
by product quality, customer satisfaction, product innovation and leadership in
firm performance.  In the study conducted
by Gijsel (2012) argued that, managers have been increasing reliance on non
financial measures by revealing that these measures are better off during the
economic crises and are also vital in evaluating firm future performance.

1.4  Results Based Objectives

Result Based on objectives is a
management strategy that is aimed at achieving a significant change in the way
the company operates as the central target is to improve performance through
expected results (objective set).  This
approach provides a framework to management for strategic plans, risk
management and how to monitor and evaluate the performance.  The primary purpose of this model is to
improve efficiency and effectiveness through accountability and performance
reporting. For a company to succeed in this approach then they must ensure that
every stakeholder is involved in the cycle and be defined according to the
expected results. This approach borrow from the system theory as it follow a
consequential relationships as the terms involved are not used interchangeably
nor out of the series.

Inputs ? Activities
Outputs ? Shot-term outcome ? Medium term outcome ? Long-term outcome

The success of this
approach is the ability of the organization to create a management culture that
focus on results as the model require more than the adoption of new administrative
and operational system. This involves designing a results oriented management

1.5  Balance Score Card (BSC)

The BSC created by Kaplan is one of the
best known and widely used multidimensional models for measuring performance
worldwide. Its contributions to measure performance on a balanced and
integrated system  using four
perspectives of an organization has made a significant stem from the old
financial performance measure. The importance of this model is that it recognizes
customers and employees as crucial to organizational achievements. The model
also has given opportunity to use non financial measures by succeeding the
previous metrics such as the Economic Value added (EVA). (Kumar, 2004)

This model has been
used by governments, non-profit organizations and wide business industry. Unlike
the traditional approach which analyzes the past performance, BSC has able to
supplement both past and future performance with objectives and measures
derived from the organizations’ vision and strategy.






this include measures, objectives and initiatives on how to succeed financially
and appear healthy to their shareholders.

this includes measures, initiatives and objectives on how should the company
appear to the customer and achieve their vision (customer satisfaction)

Business Processes; this includes measures, initiatives and
objectives on which business processes must the company excel at to satisfy
their customers and shareholders.

and Growth; this includes measures, targets,
initiatives and objectives on how will the business sustain and the company
ability to improve and achieve their vision.

According to Kaplan
(1992), the BSC model gives the top manager a fast and wide view of the
organization’s business. The model includes measures that analyze past
performance and future actions by establishing a balanced and integrated form
between customer satisfaction, financial performance, innovations, improvements
and the internal processes- with all measures derived from the organization’s
vision and strategy.

The critic of this
approach from various researchers is that, the model is incomplete as it lacks
a formal dependence on some theory of the company behavior. But the mention
limitation cannot set off the positive contribution made by this approach. In a
study conducted by Dowing (2001), reveal that 52% of companies worldwide were
using the BSC, with 21% planning to use and 23% considering using.

1.6  Value for Money

Value for money is a performance
measurement approach that has been mostly used by donors and government
authorities particularly in procurement and implementation of programs. The
model has brought debate among stakeholders as cost and value has been a major
concern.  This approach involve a
relationship between efficiency, economy, effectiveness and currently equity;
the 4Es.

Economy:  management concern is
minimizing cost to the lowest level without reducing the product quality

produced ensure customer satisfactions

output with low cost measures without reducing the product quality.

obtained from the business is distributed equally to stakeholders.


1.7  Stakeholder Based Measures and Environmental Performance.

Environmental performance has currently
become one of the most important factor under the corporate social
responsibilities which consider the interest of stakeholders against their
impacts on that society. Companies are aware of the significance of
environmental issues on firm performance. The main reason to evaluate
environmental performance is to be ensured that the company is not exposed
environmental risks.

Studies have been conducted to analyze
the impact of environment on firm performance with others with other
researchers argues that good environmental measures also produce economic

Environmental Indicators includes;

Environmental impacts from company’

Regulatory compliance

Organizational processes (accounting,
audit, reporting)


1.8  Evaluation of Suitable Approach

From this evaluation I recommend Balance
score card as a significant to for performance evaluation as it considered
important stakeholders such as employees and customers as part and parcel of
the company success. Adding from the traditional approach, this model is able
to evaluate both past performance as well as future actions of the company.

1.9  Transfer Price and Performance

Transfer pricing involves a mutual
pricing procedure on goods and service between tow companies or divisions of
the organizations. The term involves setting, analyzing, documenting and
adjusting for changes that are made between the two division on goods and
services supplied. Companies normally use transfer pricing for saving on tax,
remittance of dividend, changes in exchange rates and goal congruent decisions.

The problem caused by this practice
includes; there are situations where the market price is high compared to price
of the division this bring difficulties to decision making on division managers
as they always aim to sell at high price. Under some circumstances transfer
price at market value might provide incentives to use up the spare resources in
order to provide a marginal contribution to profit.

Case Study on Evaluation of Financial and Non-financial Performance.

This part uses Simba Cement Company to
evaluate the financial performance from 2013 to 2016


Source: Simba Plc Financial

The findings reveal that the company profit has been
decreasing from 2013 to 2016. The reason behind this is inefficiency of the
company to use their assets to generate revenue as it keep on decreasing over
time. The NPM also shows the impact made the decrease in sales volume as the
company had a net profit margin of 17.76 in 2013 as compared to 2.55 in 2016.
According to chairperson statement of 2016, the market headwinds negatively
impacted the company which reduces the sales by 20% in 2015-2016, the continued
increase market competition and the lower infrastructure projects from the
government. Simba cement therefore has taken measures to increase operational
efficiency and reduce cost.


Source: Simba Plc Financial

The current ability to meet short term obligation
has decreased from 4.42 times in 2013 to 1.31 times in 2016. This shows that
the company will be struggling in meeting immediate obligations as a ratio of
1.3 times in three consecutive years not a good sign to lenders. The findings
show that from 2014 the company was unable to meet their immediate obligations
without selling their inventories. The reason for this difficulty is the
company actions to raise funds through borrowing and the negative balance in
their overdraft accounts

Efficiency Ratios

Source: Simba Plc Financial

decrease in company turnovers shows that the company had to extend their credit
limits to their debtors as findings shows that the company had a turnover of
19.41 xs in 2013 as compared to 10.73 xs in 2016. In other words the findings
reveal that the company took 18days to collects their receivable in 2013 as
compared to 34days in 2016 although the ratio maybe attributed by the decrease
in credit sales during that period. The company was less efficient in utilizing
the fixed asset to increase sales as the last three years the ratios was below
1. This inefficiency in sales also observed in inventory turnover as the low
ratios implies that the company is weak in sales.

Leverage Ratios

Source: Simba Plc Financial

The leverage ratios show that as time goes on the
company was increasing the amount of borrowing to finance their operations. The
company was less leverage in 2013 as compared to 2016 where it was high leverage
as the debt to equity ratio was 1.37. in 2013 the company had no finance cost
which means that there was no borrowing during that year, but even when they
borrowed in 2014 they were able to pay interest cost by 287 times from their
operating profit. But in 2015 and 2016 shows that the company was high leverage
and the ability to pay interest was low as interest coverage ratio was 1.79 and
1.4 in 2015 and 2016 respectively.






Source: Simba Plc Financial

The findings show that the amount of dividend paid
per one share decrease during the period under analysis as the company declared
a dividend per share of 110 TZS in 2013 as compared to 80 in 2016. The reason
behind this decrease is the decrease in profit for year, as resulted to the
company declares a minimum amount of dividend as sometimes the company may opt
to retain dividend to finance other project as the company is in short of
finance. The decision made on decrease in dividend actually affects the market
price stock at the stock market.








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