1st Edition

Analysing Financial Performance Using Integrated Ratio Analysis

By Nic La Rosa Copyright 2021
    154 Pages 50 B/W Illustrations
    by Routledge

    154 Pages 50 B/W Illustrations
    by Routledge

    Despite a plethora of techniques to analyse the financial performance of a business, there has been no single methodology that has been overwhelmingly preferred by users. This could be an indication that either the methods themselves are deficient or they are limited by other factors that are not easily overcome.

    Unlike the current offerings in the field, which focus on issues relating to business performance management or non-financial aspects (such as market efficiency, satisfaction and workforce productivity), this book offers a solution to a major gap in the literature and understanding for those seeking to measure, analyse and benchmark the financial performance of any organisation (for-profit, not-for-profit and government agencies). It clearly identifies why current techniques fail; proposes and evidences a solution that overcomes these issues by including two algorithms that can be combined, to solve this problem; and demonstrates the practical application of the technique to the benefit of users in order to pinpoint real performance levels and insights. One of the largest issues this book will help to overcome is the inability to compare the accounts of businesses/organisations from different countries that report in different currencies. This technique eliminates the need for currency translations and the issues that arise with that process.

    This book is an invaluable and practical guide to assist accounting and finance practitioners in measuring and comparing financial performance across firms with different business models, different accounting policies and different scales of operations.

    List of figures

    List of tables


    1 Background and overview

    2 Issues with currency and related financial performance measurement techniques

    3 Issues with percentages, ratios and other attempts at absolute measurement scales

    4 The proportional asset ratio (PAR) as a solution

    5 The anchored ratio

    6 Integrated ratio analysis

    7 Summary and conclusion



    Nic La Rosa, PhD (La Trobe University), CA, CPA is able to draw on over 30 years of industry experience managing complex organisational budgets and leading strategic planning, performance analysis and change management. Commencing his career with KPMG, Nic moved into a career of various executive financial and management roles across the tertiary, private and not-for-profit sectors. This includes roles as Chief Financial Officer (CFO), Manager Financial Performance Analysis, Business Analyst, Financial Accounting and Manager of Finance and Resources. With a PhD in economics and full accreditation and membership with Chartered Accountants of Australia and New Zealand (CAANZ) and CPA Australia, he has presented on his research at conferences and symposiums in Australia and the United States.

    'The aim of the book is to provide the reader with an innovative approach to the use of standard accounting principles as a means of evaluating company performance. This aim is achieved via the debunking of several commonly held conventions in the accounting profession that are shown therein to be fallacious. To this end, the book may very well prove to be quite an important contribution to this stream of accounting and finance literature. Furthermore, I can safely suggest that it is of current interest to a potentially wide readership. It is also of potential long-term interest to anyone who (in, let’s say, 20 years’ time) will retrospectively study how the role of major 21st century crises (think GFC and COVID-19) truly affected firm value, in comparison to how the current/existing accounting "orthodoxy" would suggest. Thus, there is considerable potential for it to be relevant beyond the normal shelf-life of typical accounting and finance-themed books. To this end, one of the most attractive features of this book is its timing. Following the current economic shock, the environment will naturally be more open to new paradigms, and the accounting field is certainly no exception to this generality. In closing, I give this submission my highest possible endorsement.' — Dr Liam Lenten, Adjunct Senior Lecturer, Department of Economics, Finance and Marketing, La Trobe University.

    'Long overdue, finally a reliable resource is available that talks to the value of interpreting the Financial Statements using a methodology that cuts through the myriad of complexity to provide an analysis that is practical and easy to understand, yet also imperative to understanding the true performance of a business.' — Jason Cunningham, Co-Founder & Director, Head of Business Advisory, The Practice.

    'The old saying 'What gets measured gets done' may sound a little cliched but that does not reduce from its importance in the world of Business and Finance. As such, this book could be an invaluable and practical guide to assist accounting and finance practitioners in measuring and comparing financial performance and I am happy to recommend this book and applaud Dr Nic La Rosa, CA, CPA for this effort.' — Dr. Chris D'Souza, PhD FCMA FCA FCPA, Chief Financial Officer & COO (International), Institute of Certified Management Accountants, Australia.