Financial Terms: Financial Assessment

What is financial assessment?

Financial examination refers to the comparison between the actual number of financial indicators in the reporting period and the required assessment indicators to determine whether the responsible units and individuals are.

The close link between financial examination and material rewards and punishments is the requirement of carrying out the principle of responsibility system and the key link in building incentive and restraint mechanisms.

Financial assessment is mainly carried out within the enterprise, and the assessment of the state financial department to the managers of state owned enterprises is a macro financial examination.

Financial assessment indicators should be responsible units or individuals should be responsible for the completion of the responsibility of control indicators, generally based on the financial responsibility indicators assigned to conduct assessment, so that the completion of financial indicators have strong means of restraint and incentives.

Therefore, financial assessment is a means to enable enterprises to complete their financial plans in an all-round way, to supervise relevant units and individuals to comply with the financial system, and to implement the internal economic accounting system.

Through financial assessment, we can correctly implement the principle of distribution according to work and overcome egalitarianism.

Form of financial assessment

The form of financial assessment is varied. In order to carry out the economic responsibility system, financial examination should be closely linked with material rewards and punishments.

(1) absolute index assessment, which is suitable for the examination of certain fixed expenses and financial achievement indicators, such as some indirect costs in manufacturing costs, some fixed cost indicators in the period costs, and the assessment of profits.

(2) relative index assessment, which is suitable for the assessment of financial indicators which are more variable and has certain change rules, such as the utilization of the sales capital ratio (or output capital rate) to assess the occupation amount of the current funds, and the assessment of the management performance of state-owned assets by using the value preservation and increment rate of assets, and by changing the rate of fees to assess the variable expenses and so on.

(3) complete the percentage assessment according to the target.

This form is suitable for some financial indicators such as the rate of reduction in fees, the rate of turnover of mobile funds, and so on.

(4) grading assessment, which is suitable for comprehensive assessment of various financial indicators, is conducive to comprehensive evaluation.

The form of financial assessment should be determined according to the specific circumstances of the enterprise.

Various forms can be used alone or in combination.

The general method of financial management is closely related organisms.