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Accounting And Finance > Week 8 > Flashcards

Week 8 Flashcards

1
Q

who does management accounting provide information for

A

managers and internal users of information

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2
Q

does management accounting apply to all business structures including non for profit

A

yes

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3
Q

how frequently are management account reports prepared

A

as frequently as needed

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4
Q

are management accounting reports past or current based

A

current and future focused

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5
Q

do management accounting reports give information about subunits of business

A

yes they do

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6
Q

are management accounting reports subject to external audits

A

no they are not

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7
Q

what is management accounting at its core about

A

wealth creation for a business and shareholders

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8
Q

what is organisational performance management

A

developing goals to support achievements of entities mission

transforming goals into strategies and measuring performance in achieving goals

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9
Q

what are the financial measures of performance management

A

profit
return on investment
residual income

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10
Q

what is the balanced scorecard

A

financial and non financial measures of performance, short term and long term

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11
Q

are financial indicators lagging or leading indicators

A

lagging because they inform after an event has occured

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12
Q

are non financial measures lagging or leading indicators

A

leading because they give current information and give insight into likely performance of business

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13
Q

what are the 4 perspectives to the balanced scorecard

A

1: financial perspective
2: customer perspective
3: internal business process perspective
4: learning and growth perspective

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14
Q

is there a relationship between the 4 perspectives

A

yes there is financial performance is the result of performance as seen by customers and the internal processes by which customers are serviced both are improved through continuous learning and growth

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15
Q

what is the financial perspective

A

How shareholder value is created

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16
Q

what are measures are used in the financial perspective

A

profit, ROI, other ratios

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17
Q

what is the customer perspective

A

creating value from new and existing customer base

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18
Q

what measures are used in the customer perspective

A

customer retention, satisfaction

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19
Q

what is the internal perspective

A

processes that need to exist to deliver customer value and achieve financial goals

20
Q

what measures are used in the internal perspective

A

product quality, cycle from order to delivery, labor productivity and waste

21
Q

what is the learning and growth perspective

A

continuous improvement improving the 3 other measures

22
Q

what measures are used in the learning perspective

A

employee retention rates, employee training

23
Q

are specific measures in the balanced scorecard

A

no but they need to be relevant to the industry a business is in

24
Q

how many measures in each of the 4 perspectives

A

4

25
Q

are there trade offs with the balanced scorecard

A

yes seeking high satisfaction can result in low profits and there can be a trade off between short and long term performance

26
Q

what are the 3 ways to look at balanced scorecard measures

A
  1. comparison to competitors
    2: targets set during strategic planning
    3: improvements over time
27
Q

is the balanced scorecard perfect

A

no it has limitations

28
Q

what is the benefit of using profit as a financial measure

A

allows trend measurement and comparison against benchmarks

29
Q

what are the disadvantages (of profit)

A

it does not consider investment in business, size of investments and does not allow comparions across divisions

30
Q

what is ROI

A

return on investment

31
Q

how is ROI calculated

A

profit / invested capital

32
Q

how can further analysis of the ROI be conducted

A

by using the Du Pont ROI

33
Q

what is the Du Pont ROI

A

return on sales * investment turnover

34
Q

what is investment turnover and how is it calculated

A

a ratio that measures the amount of sales generated relative to the level of investment
sales / investment

35
Q

what is return on sales and how is it calculated

A

it is the profit margin ratio which measures profit relative to sales.
profit / sales

36
Q

how can investment turnover be increased

A

increasing sales revenue or reducing invested capital

37
Q

how can return on sales be increased

A

increasing sale price or decreasing expenses

38
Q

do actions that seek to improve in short term have long term implications

A

yes they commonly do

39
Q

what are advantages of ROI

A

easy to understand, links profit with investment, encourages focus on profits and can be used to evaluate performance of business units relative to others

40
Q

what are limitations of ROI

A

encourages short term focus sacrificing long term, deferred asset replacement to keep ROI high, reduces investment that might decrease ROI

41
Q

what is residual income

A

profit - (invested capital x imputed interest rate)

42
Q

what is an imputed interest rate

A

based on the required rate of return that the business expects of its investments, based on the cost of capital

43
Q

is the RI expressed in % like the ROI

A

no it is expressed in real $$ terms

44
Q

what are advantages of the RI

A

promotes goal congruency, takes account required rate of return and encourages investment in projects that yield a positve RI

45
Q

what are limitations of RI

A

can’t asses relative performance with different size businesses, formula biased in favor of large businesses and can also encourage short term focus

Accounting And Finance (8 decks)

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