Financial Analysis Based on Benchmarking Technique


Budget expenses variation is generally associated with various financial management principles implemented within the organizations. In general, these variations are closely linked with the origins of the business, and the marketing situation within which a company operates. The aim of this paper is to analyze the budgeting expenses of five various companies and explain the origins of the expense variance. This analysis is required for assessing the financial management strategy of a company in order to make the corresponding analysis and reliable forecast of the company’s further financial processes.


The five companies that are taken for analysis are EMI music, Virgin Blue, Dixons Retail PLC, British Airways, and General Electric. In fact, the business origin of these companies is completely different. Regardless of the fact that BA and Virgin Group are operating on the market of airline transportation, the geographic locations, as well as financial circumstances of these companies are various.

The budget expectations of these companies are taken from their annual reports as well as experts’ estimations. The ratios were calculated based on the current financial data. The revenue and expenses statement is regarded as the key financial data required for analyzing the budget of any company, hence, the values of the budget expectation variances are assessed from the perspective of the traditional and budget benchmarking technique. (Khan and Hildreth, 2004) This presupposes the comparing of the possible revenue and expenses caused by various origins and financial performance principles, hence, the forecast is based on the average data of the companies’ financial performance.

$ millions EMI Music Virgin Blue Dixons Retail British Airways General Electric
Revenue $ 1375 $ 2976 $ -140,4 $ 1534 $ 351,375
Operating Expensess $ 266 $ 1767 $ 11,3 $ 278 $ 46,1
Inventory $ 8,9 $ 188,8 $ 5164 $ 308 $ 43,9
Taxes $ 34,1 $ 108,1 $ 24 $ 53 $ 51
Salaries $ 174 $ 66,2 $ 708 $ 78,8 $ 20,5
Manufacturing costs $ 7,5 $ 639 $ 35 $ 708 $ 37,8
Other liabilities $ 240,00 $ 12,00 $ 29,70 $ 98,70 $ 52,08
Total Expenses $ 730,5 $ 2781,1 $ 5972 $ 1524,5 $ 251,38
Expected $ 878 $ 2753 $ 4678,7 $ 1284 $ 378,4
Current Ratio 1,88 1,07 -0,02 1,01 1,00
Quick Ratio 1,87 1,00 -0,89 0,80 0,88
Receivable turnover 1,88 1,04 -0,46 0,91 0,94
Average Collection Period 194,54 352,27 -800,68 403,22 389,33

The reasons for variance between expectations and actual data are different. In fact, there are no rude mistakes observed except Dixon’s Retail. The entire report of this company revealed the incorrect market assessment techniques; hence, the variance in expectations and actual expenses is essential. Additionally, this is the only company the CEO board of which is not involved in the control of all the financial activities of the company, as the e-commerce branch is controlled separately.

Virgin Blue is featured with the highest accuracy of the budget calculations. On the one hand, it is explained by the fact that the Australian market is stable enough, and unexpected factors are not very likely. On the other hand, the company is managed in accordance with the fair competition principles that require accurate assessment of the market financial situation, as well as the expenses that will be required for competing with other market players as well as keeping the existing consumers’ base satisfied.

EMI Music has the largest expectation rates, as the sound recording industry is experiencing a crisis caused by the development of music illegal spread, and the wish to get the music for free, while the musicians need to record their music and hit their audience. Actually, the principles of business activity of EMI are not disclosed; however, the general principles of this industry presuppose that the company pays for concluding a contract with an artist or a group, thus acquiring the rights for issuing an album, single, or a song. Considering the fact, that music quickly becomes available free for listening or even downloading, the sound recording companies are experiencing a crisis.


The analysis tendency based on benchmarking technique is closely linked with the values of quantitative and qualitative analysis. (Cremonini and Valeri, 2003) Hence, the proper application of a benchmarking technique requires proper analysis of the financial data of any organization, hence, the actual importance of the benchmarking is associated with the values of assessing the financial data regardless of the results required and the background. Additionally, the generally accepted benchmarking strategy is inevitable without proper business background analysis. Hence, the background benchmarking technique is helpful for analyzing the industry development in general, and the development of the competitive performance of a company. (McMenamin, 2007)

Background EMI Music Virgin Blue Dixons Retail British Airways General Electric
Industry The industry is in crisis, the market is not developing as musicians do not wish to experience losses The industry is stable, especially the industry of low-cost airline transportation The industry is stable, however, it is hard to forecast effective development and stable income for this company The industry has reached its top developing point The industry has endless development potential, and everything depends on the team of the company, as well as financial performance.
Competition Most competitors have crashed, and the new entrants are not jeopardizing the company Competitors are trying to implement the same principles of services, however, VB is the leader of the Australian market Competitors are engaged in e-commerce business principles development Competitors are trying to improve their position, however, BA is the leader. In some situations, competitors may be regarded as partners, if they are engaged in the same sector of research.

Quantitative benchmarking is based on the review of the calculation of the ratios and further application of the results for the forecasts. In general, the ratio clearly shows the weak points of any financial strategy, hence, the destinations of improvement may be stated instantly. (Vogt, 2005) The lower ratios mean that the company needs to pay close attention to expenses, credit sales, loan amortization, etc. (Seto, 2004)

Qualitative analysis of the expenses is based on assessing the account receivable. This parameter defines the financial stability of an organization and helps to assess the reliability of the financial strategy, as the values of the accounts receivable reveal either the necessity to improve the accounting strategies or decrease the expenses. (Moraglio and Kerrigan, 2001)

EMI Music Virgin Blue Dixons Retail British Airways General Electric
Accounts Receivable 143 1564 250,9 213 234,7


Budget management analysis principles are based on three generally accepted principles: quantitative, qualitative, and background. Hence, the company’s forecasts of the company’s further expenses and financial operations may be performed by combining these three techniques of market and performance analysis.


Cremonini, L., & Valeri, L. (2003). Benchmarking Security and Trust. Santa Monica, CA: Rand.

Khan, A. & Hildreth, W. B. (Eds.). (2004). Financial Management Theory in the Public Sector. Westport, CT: Praeger.

McMenamin, J. (2007). Financial Management: An Introduction. London: Routledge.

Moraglio, J. F., & Kerrigan, H. D. (2001). Budget and Financial System: A Management Perspective. New York: Quorum Books.

Seto, T. P. (2004). Drafting a Federal Balanced Budget Amendment That Does What It Is Supposed to Do. Yale Law Journal, 106(5), 1449-1536.

Vogt, C. (2005). Destination Benchmarking: Concepts, Practices and Operations. Journal of Leisure Research, 37(1), 128

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