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After analysing the framework condition for the application of key figures, this chapter focuses on the presentation and assessment of value based performance measures.

In the context of this dissertation performance measures are defined as “metrics used to quantify the efficiency and/or effectiveness of an action.” A performance measurement system is a set of several metrics.896 _{Key figures are} numbers that summarise and describe precisely a selected issue.897 _{Despite the} focus on value based performance measures companies should use a variety of financial and non-financial measures as companies with a variety in their performance management system are more successful on the stock market.898

Key figures have two functions: Information and control function.899 _They inform the addressee about an issue so that he is able to build an opinion or the key figure is a kind of indicator for an expected development.900 _{Due to the} aggregation of information they enable the handling of a mass of data and also the comparison of companies and their performance.901 _{They are often used by} investors for analysing the annual or quarterly accounts of companies in order to increase transparency and reveal issues that are only difficult to detect without them.902 _{The main purpose of key figures is to summarise information and reveal} cause-effect relationships.903

896 _{Definition quoted from: Neely, A., Gregory, M., Platts, K. (1995), pp. 80-81.} 897 _{Cf. Barth, T., Barth, D. (2008), p. 136.}

898 _{Cf. Ittner, C. D., Larcker, D. F., Randall, T. (2003), pp. 716, 727-728;} Schmeisser, W., Clausen, L. (2009), pp. 74-75.

899 _{Cf. Horzella, A. (2010), p.91.}

900 _{Cf. Siepermann, M. (2008), pp. 150-151.} 901 _{Cf. Hauschildt, J. (1996), p. 3.}

902 _{Cf. Baetge, J., Kirsch, H.-J., Thiele, S. (2004), p. 35.} 903 _{Cf. Weissmann, F. (2005), p. 70.}

From a company’s perspective key figures enable an organisation to demonstrate how successful the planned strategy is transferred into financial results. Key figures have a high importance because they are easy to interpret.904 Companies invest in performance measurement systems because they help them to consequently monitor their objective of delivering Shareholder Value.905 _But simply installing such a system is not sufficient. A part to Shareholder Value creation can only be reached if design and development are fitting to the company,906 _{e.g. it is crucial that the key figures correspond to the company’s} environment and strategy in order to properly report the company’s current situation.907 _{A balanced key figure system consists of financial as well as non-} financial key figures.908

In their control function key figures support managers in decision making, e.g. a certain threshold has to be exceeded, in order to conduct an investment project or there exist predefined values of key figures single departments within a company have to fulfil.909 _{Outgoing from the two functions of key figures, they} support decisions by managers due to their information function and steer their behaviour as they set thresholds for making investments.910

Traditional key figures can be clustered according to statistical aspects.911 Absolute numbers contain single numbers like cash balance, sums like balance sheet total and differences like the profit taken from the profit and loss

904 _{Cf. Melnyk, S. A., Bititci, U., Platts, K., et al. (2014), p. 173.} 905 _{Cf. Franco-Santos, M., Lucianetti, L., Bourne, M. (2012), p. 79.} 906 _{Cf. Franco-Santos, M., Lucianetti, L., Bourne, M. (2012), pp. 96-97.}

907 _{Cf. Ittner, C. D., Larcker, D. F., Randall, T. (2003), p. 715; Melnyk, S. A.,} Bititci, U., Platts, K., et al. (2014), p. 174.

908 _{Cf. Fiedler, R., Gräf, J. (2012), pp. 335-336.}

909 _{Cf. Barth, T., Barth, D. (2008), p. 136; Ewert, R., Wagenhofer, A. (2014), p.} 513.

910 _{Cf. Coenenberg, A. G., Schultze, W. (2002), p. 612.}

911 _{Cf. Barth, T., Barth, D. (2008), p. 137; Behringer, S. (2014), pp. 89-90; Brühl, R.} (2016), pp. 425-427; key figures can be grouped according to several other aspects, e.g. operating functions (procurement, sales), data sources (accounting, cost accounting), temporal structure (key figures measuring the status quo at a certain point in time or key figures that refer to a period).

and index ratios.913 _{Relation ratios are key figures which consist of two logical} related numbers which are then mathematically connected, e.g. return on equity. Classification ratios describe the share of one part in relation to total parts, e.g. equity ratio. Index ratios connect the same key figures which differ in time, e.g. a price index or actual turnover compared to planned turnover.914 _{Examples for} traditional key figures are return on equity, return on total capital, return on sales, return on assets or return on investment.915

Beside the publication of necessary and prescribed earning numbers according to IFRS, companies tend to reveal additional key figures which are adjusted or modified. Two incentives exist for managers to reveal voluntarily additional key figures, also named as pro forma key figures. Firstly, managers want to influence the assessment of their company by analysts in a positive way by eliminating certain expenses and fulfilling performance targets defined by analysts. This behaviour is named as opportunistic non-GAAP earnings disclosure. The second motive is that managers want to demonstrate what the true long-run economic performance of a company is and to eliminate transitory items from earnings. This enables investors and analysts to better estimate the future performance. Concerning the two incentives, it is difficult for persons outside the company to differentiate between the two motives of managers and thus to evaluate the quality of the key figures.916

Due to these circumstances a uniform definition of key figures and their calculation would be preferable from an investor’s point of view. This claim is congruent to one principle of Value Reporting, namely comparability. For financial key figures an intercompany comparability can be ensured by

912 _{Cf. Barth, T., Barth, D. (2008), p. 137; Homburg, C. (2017), p. 1232.}

913 _{Cf. Baetge, J., Kirsch, H.-J., Thiele, S. (2004), pp. 147-149; Groll, K.-H. (2000),} pp. 9-12.

914 _{Cf. Homburg, C. (2017), p. 1232; Ohliger, T. (2016), p. 102; Weissmann, F.} (2005), p. 72.

915 _{Cf. Schmeisser, W., Clausen, L. (2009), p. 86; Schneider, N. C. (2007), p. 45.} 916 _{Cf. Beyer, A., Cohen, D. A., Lys, T. Z., et al. (2010), pp. 321-323.}

explaining single components of a key figure and the premises for their calculation.917