BAR: NonFinancial and NonGAAP Measures of Performance Flashcards
(52 cards)
Customer Retention Rate
summarizes the number of percentage of customers who continue to use an entity’s products or services for a specified time. To maintain or improve this rate, businesses typically need to improve product offerings and value. (i.e. loyalty programs, multiyear contracts)
Employee turnover
Represents the number or percentage of workers/employees who voluntarily or involuntarily (or both) leave the business within a certain time frame (usually one year) and are replaced by new employees.
Labor productivity rate
Indicates the # of units of work completed by a worker in a defined period of time (i.e. man hours). (Total value of output for a specified period of time divided by the total number of labor hours)
Ticket response time
Identifies how long it takes customer service to first respond to a ticket.
Free cash flows (FCF)
Represent the after-tax cash available to capital providers (i.e. investors) after accounting for operating expenses and investment in fixed and working capital
Calculation of and uses of free cash flow
Calculation (Net income + noncash expenses +/- working capital - fixed capital); Uses (Repayments of LTD, Dividends, Stock repurchases)
Core earnings
a concept that was developed by Standard and Poor’s to identify “Business-as-usual” income generate by normal, recurring business operations; not recognized as a GAAP concept but used by management and investor to assess the profitability of the underlying business.
Calculation of core earnings
Pretax earnings - nonrecurring income - pension gains + loss on asset sales
Adjusted net income for nonrecurring expenses
is calculated by removing nonrecurring items from net income to arrive at an amount that represents typical (i.e. recurring) net income
Discontinued operations
A type of nonrecurring expense; gain/loss from the disposal of a component (i.e. segment) of an entity that has a significant effect on the entity’s operations and financial results
Unusual/infrequent items
A type of nonrecurring expense; items that are either unusual in nature or infrequent in occurrence (eg, restructuring charges)
Change in estimate
A type of nonrecurring expense; a gain or loss resulting from a voluntary change in an entity’s estimation policies, such as a change in depreciation methods (eg, straight-line to double declining)
Cost of quality
a philosophy with three core tenets; 1) that failures have causes 2) preventing failures is cheaper than fixing it later 3) measuring a firm’s performance regarding cost of quality helps the firm
Prevention costs
(a type of quality cost) use high-quality materials, provide employee training, require routine preventative maintenance, require supplier education/certifications
Detections/Appraisal Costs
(a type of quality cost) inspection of raw materials, work-in-progress, finished goods; depreciation expense of testing equipment; supervision of testing team
Internal failures costs
(a type of quality cost) disposing of scrap due to wasted materials, reworking defective units, re-inspecting and retesting after rework
External failure costs
(a type of quality cost) warranty, costs, product liability and product recall costs, lost future sales and damaged reputation, lawsuits
Conformance costs
(i.e. prevention + detection/appraisal cots)
Nonconformance costs
(i.e. internal + external failure costs)
Six-sigma quality
a statistical measure of the percentage of products that are in acceptable form, based on standard deviation measures
Total quality management (TQM)
an entity-wide effort to continuously improve the ability to deliver high-quality products and services through systematic analysis; thus, it includes insights from suppliers as well as employees
Theory of constraints (TOC)
bottleneck; is used to maximize operating income and overcome bottlenecks in operations
Strategy maps
i.e. diagrams; help to identify cause-and-effect relationships
Decision trees
as a project evolves, conditions evolve that require new decisions to be made
