Flashcards in Performance Measures Deck (28):

1

## Financial / Customer / Internal Business Processes / Learning and Growth

### Performance Measurement

2

## To measure Performance.

### Performance Measurement

3

## Diagrams of Strategic Cause and Effect Relationships.

### Performance Measurement

4

## A plan to achieve goals.

### Performance Measurement

5

##
Return on Investment

Residual Income

Spread

Economic Value Added

Free Cash Flow

### Performance Measurement

6

##
ROI : Return / Investment

Example: You Invest $100 to buy a machine that generates $60 in Operating Income

$60 / $100 : 60% ROI

### Performance Measurement

7

## Operating Income - (Required Rate of Return x Invested Capital) : Residual Income

### Performance Measurement

8

##
RROR is also called 'Cost of Capital'

### Performance Measurement

9

##
Cost of Capital is the weighted average of the interest rates you pay for your Capital.

Includes Debt and the Rate of Return your Equity Shareholders expect

Example: 45% of your Capital is supported by debt and has an interest rate of 9%. 55% of your Capital is supported by equity and shareholders expect a ROR of 12%

Your Cost of Capital is: (.45 x .09) + (.55 x .12) : 10.65%

### Performance Measurement

10

## Spread : ROI - Cost of Capital

### Performance Measurement

11

##
Investments should exceed costs- with an emphasis on stockholder value.

Economic Value Added : Operating Income After Tax - (Net Assets x WACC)

### Performance Measurement

12

##
Operating Income After Tax

+ Depreciation & Amortization

- Capital Expenditures

- Change in Net Working Capital

: Free Cash Flow

### Performance Measurement

13

## It measures a product versus its quality goal.

### Performance Measurement

14

## Sales / Average Assets

### Performance Measurement

15

##
Can the company pay their short-term liabilities?

Current Ratio : Current Assets / Current Liabilities

### Performance Measurement

16

##
How is the company financing its capital?

Debt to Equity Ratio : Total Debt / Total Equity

### Performance Measurement

17

##
What proportions of the company's assets are encumbered with debt?

Debt to Total Assets : Total Liabilities / Total Assets

### Performance Measurement

18

##
How profitable is the product after COGS?

Gross Margin : Gross Profit / Net Sales

### Performance Measurement

19

##
How profitable is the product after all expenses (except interest and taxes)?

Operating Profit Margin : Operating Profit / Net Sales

### Performance Measurement

20

##
Can the company make their interest payments?

Times Interest Earned : Earnings Before Tax & Interest / Interest Expense

### Performance Measurement

21

##
What % return are the assets generating?

Return on Assets : Net Income (net of interest & taxes) / Average Total Assets

### Performance Measurement

22

## Market Value of Common Stock / Book Value of Common Stock

### Performance Measurement

23

##
How quickly does inventory get sold?

Inventory Turnover : COGS / Average Inventory

### Performance Measurement

24

##
It measures short-term liquidity- and only includes assets that are quickly available (i.e. not inventory)

Quick Ratio : (Current Assets - Inventory) / Current Liabilities

### Performance Measurement

25

##
How many days does it take the company to collect payment on A/R?

Average Collection Period : Average AR / Average Sales Per Day

### Performance Measurement

26

## Products have quality defects- but are caught BEFORE they leave the warehouse.

### Performance Measurement

27

##
Product reaches the customer- but they are not satisfied with the quality of the product.

This includes recalls.

### Performance Measurement

28