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The achievement of financial objectives tends to be a lagging indicator of a company's performance while...

The achievement of financial objectives tends to be a lagging indicator of a company's

performance while the achievement of strategic objectives tends to be a leading indicator of

a company's future financial performance. True or false? Support and explain your answer

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Answer #1

The statement is true

Reason is that company's financial performance measures are really lagging indicators as they are result of past decisions and organizational activities, strategic decisions made by management in the past. However, past/current financial performance is not reliable indicator of the future prospects—we have seen poor financial performers often turning things around and doing better, and good financial performers falling upon hard times. Best & most reliable leading indicators of company's future financial performance & business prospects are strategic outcomes which indicate whether company's competitiveness & market position is stronger or weaker. Accomplishment of strategic objectives signals that the company is well positioned to sustain or improve its performance.

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