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Logic and tools to investigate group performance - Coggle Diagram
Logic and tools to investigate group performance
Limitations of CFS
CFS shows overall performance but may hide
Profitable vs. loss-making subsidiaries.
Financial difficulties (e.g. insolvency risks).
Doesn’t reflect
Current values (backward-looking).
Intangible assets (like intellectual capital).
CFS ≠ Individual FSs: both are relevant!
Important for creditors and non-controlling interests.
Parent company is not legally liable for subsidiary issues.
Performance analysis
equilibrium
as a concept
Achieved via good past choices (or lost through bad ones).
Requires evaluating under two main profiles:
Economic: Profitability.
Financial: Solvency (capital mix: equity vs. debt).
= Ability of the group to survive over time (going concern).
at the group's level
4 typical situations, combining Coordination by parent (high/low) & Economic liveliness of subsidiaries (yes/no).
System of equilibria: low, yes. Single companies matter; each unit’s equilibrium is vital.
Equilibrium of the system w/ local equilibria: high, yes.Best scenario; investigate both group and single companies.
Equilibrium of a system: high, no. Group-level only; losses of some companies are tolerated.
Inconsistent: low, no. Contradictory and unstable situation.
Tools for Group Performance Analysis (Use these to investigate equilibrium)
Segment reporting
Helps analyze performance of different parts of the group
Economic equilibrium
Matrixes
Profitability ratios
Financial equilibrium
Matrixes
Financial ratios