The formulation of the strategy depends on identifying the activities that must be accomplished, and using the organization's distinctive capabilities and strengths in a way that is not found in other organizations and depends on three main elements: the strategic goals, strategic analysis, strategic choice.
Many strategic analysts rely on analyzing the financial ratios of performance appraisal, analyzing the strategic gap and knowing its internal and external causes. It is the starting point in exploring the financial conditions in the facility and an effective way to obtain a clear view of the operations of its various activities
I think that there are financial, performance and efficiency ratios. Depending on what is the focus of the strategy then you can decide which ones you want to use.
Every businessman has the objective of running the business in a successful way.Ratios are really useful in chalking out the future course of business by formulating/amending the strategies in the light of changed environment.For strategists, ratios are helpful as they provide a quantified index for qualitative judgments. Top level management must keep in mind the ratios like Return on Investment,Return on Capital Employed as these are the mirror of efficiency of a company.Really. these ratios are useful in strategy formulation.
Ratio analysis does not merely involve the application of a formula to financial data, but more important is the interpretation of the ratio value. Financial ratios are used when drafting the strategy, and also when evaluating performance.
I'd start from the cash flow statement. identify for each of operations, investing, financing the key ratios you want to follow according to your industry. For more mature industries benchmark competitors. I think the organization must be tailored to customers and owner's goals not the other way around -that is unless you are a civil servant ;-) The idea is to build somewhere a competitive advantage that should yield better financial results if successful in the eyes of your customers.
I recommend to begin with screening 8 to 10 (or more) corporate reports to identify the most "valuable" ratios (the ones that are monitored by the "elephants") and then use the short-list of ratios to run a preliminary diagnostics. Matching ratios with physical performance data (i.e. unit economy or sales/output data) and comparing those with the industry average or the nearest/biggest competitor could help draft a strategy, at least the generalized one.
recommend to begin with screening 8 to 10 (or more) corporate reports to identify the most "valuable" ratios (the ones that are monitored by the "elephants") and then use the short-list of ratios to run a preliminary diagnostics. Matching ratios with physical performance data (i.e. unit economy or sales/output data) and comparing those with the industry average or the nearest/biggest competitor could help draft a strategy, at least the generalized one.
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