Flashcards in Performance Measures (M45) Deck (60):
____ Describes how an organization uses its activities and resources to achieve its objectives
____ Includes the performance measures used to ensure the strategy of the organization is being executed and to monitor performance
The ______ is a strategic performance measurement and management framework for implementing strategy by translating an organization's mission and strategy into a set of performance measures
What are the 4 primary perspectives of a balanced scorecard?
3) Internal Business Processes
4) Learning & Growth
What are the 5 components of a balanced scorecard?
1) Strategic Objectives
2) Performance measures
3) Baseline performance
5) Strategic initiatives
What is the most important purpose of a balanced scorecard?
What are the 5 characteristics of the balanced scorecard?
3) Includes both financial & non-financial measures
4) Cause & Effect Linkages
5) Unique to the strategy
Economic Profit is...
Accounting Profit Minus Cost of Capital
Economic Value Added is...
Net operating profit after taxes -
[the after-tax weighted-average cost of capital * (total assets minus current liabilities)]
These ratios measure how effective a firm is at generating profit from operations. Management attempts to maximize these ratios to maximize firm value
How do you calculate Gross Margin/Gross Profit
- Sales Discounts
- Sales Returns & Allow
= Net Sales
How do you calculate common stockholder's equity?
- P/S Par Value
- P/S Dividends
- P/S Liq Premiums
= SHE to C/S
Calculate Cost of Goods Purchased
- Purchases Discounts
- Purchases Returns & Allow
= Net Purchases
+ Freight in
= CoG Purchased
Calculate Cost of Goods Sold
+ CoG Purchased
- Ending Inventory
These ratios measure the effectiveness with which management finances the assets of the firm. They are used to evaluate the financial leverage of the firm
Debt Utilization Ratios
These ratios involve measures that consider the market value of the firm's common stock
What financial analysis technique would imply benchmarking with other firms?
a) Horizontal analysis
b) Vertical analysis
c) Cross-sectional analysis
d) Ratio analysis
This compares similar operations within different units of the same organization
This targets processes and methods used by an organization's direct competitors
This compares similar functions within the same broad industry
Functional or Industry Benchmarking
This compares processes that are independent of industry
When the Numerator is Greater than the Denominator, and you add equal amounts to both, you get a ___ in the ratio
When the Numerator is Greater than the Denominator, and you decrease equal amounts to both, you get a ___ in the ratio
When the Denominator is Greater than the Numerator and you add equal amounts to both, you get a ___ in the ratio
When the Denominator is Greater than the Numerator and you decrease equal amounts to both, you get a ___ in the ratio
This is a continuous process of comparing the levels of performance in producing products and services and executing activities against the best levels of performance. It is the search for and implementation of best practices.
These are the performance metrics used in benchmarking
This focuses on managing the organization to excel in quality in all dimensions of products and services for customers
Total Quality Management
What are the 5 phases of the life cycle of business process management?
This phase of the life cycle of business process management involves identification of existing processes and design of process improvements.
This phase of the life cycle of business process management simulates the process in a test environment and performs "what if" analysis to try to determine how it will work under varying conditions
This phase of the life cycle of business process management involves installing software, training personnel, testing, and implementing the new processes
This phase of the life cycle of business process management is continuous after the execution phase and involves tracking the processes with performance statistics
This phase of the life cycle of business process management involves retrieving performance statistics from modeling or monitoring and identifying potential bottlenecks or other problems for additional improvements of the process
___________ is a statement of what the strategy must achieve and what is critical to its success
_________ is a key action program that is required to achieve strategic objectives
_____ are diagrams of the cause-and-effect relationships between strategic objectives
_____ describe the level of performance or rate of improvement needed in the performance measure
What is the formula for the Debt-to-Total-Asset Ratio?
Total Debt / Total Assets
What is the formula for the A/R Turnover?
Total Credit Sales / Avg AR
What is the formula for Inventory Turnover?
CoGS / Avg Inv
What is the formula for Total Asset Turnover?
Sales / Avg Total Assets
What is the formula for Return on Assets?
Net Income / Avg Total Assets
What are the costs related to designing components that will not break down
What are the costs relating to inspecting products to detect individual units that do not conform to specifications
What are the costs incurred when substandard products are produced but discovered before shipment to the customer
Internal Failure Costs
What are the costs related to parts returned by customers
External Failure Costs
What is the formula for Return on Investment?
Sales / Investment
Net Income / Sales
Return on Investment is also known as Return on ____
A formula for Return on Investment is as follows:
Sales / Investment
Net Income / Sales
What is another formula that can be used when this information is not available?
Asset Turnover * Profit Margin on Sales
What is the formula for Capital Turnover?
Sales of Division / Invested Capital of Division
What is the formula for Residual Income?
Division Net Income - Imputed Interest on Investment
What is the DuPont Formula for calculating Return on Investment?
Asset Turnover * Income as a % of Sales = Return on Investment
[Revenue / Invested Capital] *
[Income / Revenue] =
[Income / Invested Capital]
How do you calculate Free Cash Flow?
Net Operating after taxes + Depr Exp - Change in Net Working Capital - Capital Expenditures
_____ is the practice of adding resources to shorten selected activity time on the critical path of a project
When a project can be completed in a number of completely different ways that might involve branching after performing activities, the best schedule and control technique would be
Graphical Evaluation & Review Technique
Residual income is a performance evaluation that is used in conjunction with return on investment (ROI) or instead of ROI. In many cases, residual income is preferred over ROI because residual income concentrates on maximizing absolute dollars of income rather than a percentage return as with ROI
Return on Investment = Return on Sales * Capital Turnover
_____ is an improvement initiative specifically designed to address errors in defects