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Most Optimal Organisation to Invest In

Persimmon exceeds Redrow in profitability, liquidity and financial stability and is therefore by default the most optimal organisation to invest in from a financial perspective. However, before rushing into hasty conclusions it is imperative that two important factors are meticulously considered and pondered upon. In section 1. 2 it was noted that both organisations hold a very weak cash flow and both are risking cash problems. It is not a rare occasion that cash was the driver of a company’s demise.

Therefore the attitude of the investor towards risk takes an important role. If the investor is a risk taker he may be inclined to invest in Persimmon. However, if he is risk-averse he will probably regard such investment as too risk and decline this investment proposal in light of the cash problems noted. Therefore the financial analyst ought to clearly explain the risks involved in such investment. The financial examination conducted in this paper focused mainly on a financial perspective.

However, an organisation is not solely affected by financial matters. There are qualitative elements like customer satisfaction, company’s innovation, employee morale, public relations of company that also hold a very important role for the company. In the absence of such features

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one cannot state that a full portrait of the company’s strengths and weaknesses had been outlined. An effective tool that can be put in practice is the balanced scorecard.

Organisations often perform the critical error of implementing a performance evaluation scheme that concentrates solely on financial factors, which are not the only element that influences the performance and financial health of the firm. The measures of a Balanced Scorecard arise from the objectives and strategies noted by the organisation in the first step of the capital budgeting process by considering financial, customer, internal business process and innovation perspectives (Kaplan et al 1996, p 2-8).

The main advantage of the Balanced Scorecard is of providing a balanced set of tangible and measurable aim that guide the operations of the firm in line with the salient objectives set. Such control measure enables the company to keep focused on customer value, internal competencies and abilities and how to keep in touch with employees, knowledge systems and procedures (Morden 2004, p 541).

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