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75 Cards in this Set
- Front
- Back
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CHAPTER 9
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STARTS HERE
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Balanced Scorecard
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A strategic management system that translates an organization's strategy into clear objectives, measures, targets, and initiatives organized by four perspectives
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Customer management processes
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Processes that select, acquire, retain, and deepen relationships with targeted customers
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Financial perspective
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The Balanced Scorecard perspective that focuses on financial measures of an organization's success, such as various measures of profitability
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Innovation processes
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Processes that develop new products, processes, and services
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Learning and growth perspective
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The Balanced Scorecard perspective that identifies the objectives for employee capabilities, information systems, and organized climate that will create longterm growth and improvement
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Measures
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Descriptions of how success in achieving Balanced Scorecard objectives will be determined
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Mission statements
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A concise, internally focused statement of how the organization expects to compete and deliver value to customers
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Objectives
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Concise statements in each of the four Balanced Scorecard perspectives that articulate what the organization hopes to accomplish
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Operating processes
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The basic, day-to-day processes by which companies produce their products and services and deliver them to customers
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Process perspective
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Describes how a strategy will be executed. It identifies the operating, customer management, innovation, and regulatory and social processes that are most important to meet the expectations of shareholders and customers.
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Regulatory and social processes
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Processes that promote meeting or exceeding standards established by regulations and facilitate achievement of desired social objectives.
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Strategy
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Describes how a company will gain competitive advantage by being different or better than its competitors. Examples of strategies include low cost, complete customer solutions, and product leadership.
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Strategy map
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A comprehensive visual representation of the linkages among objectives and measures in the four perspectives of the Balanced Scorecard.
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Targets
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The level of performance or rate of improvement required for a Balanced Scorecard measure.
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Value proposition
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Clear and short statement of competitive value that the organization will deliver to its target customers-how it will compete for, or satisfy, customers.
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Vision statements
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A concise, externally, focused statement that defines an organization's mid-to long-term goals and states how that organization wants to be perceived by the world. The set of selected activities in which an organization will excel to create a sustainable difference in the marketplace.
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CHAPTER 10
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STARTS HERE
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Activity-based budgeting
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A budgeting process that uses knowledge about the relationship between the quantity of production unites and the activities required to produce those units to develop detailed estimates of activity requirements underlying the proposed production plan.
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Appropriations
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Planned and approved cash outflows, or spending plans, in government agencies.
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Authoritative budgeting
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A budgeting process that occurs when a superior informs subordinates what their budget will be without requesting input.
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Budget
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A quantitative expression of the money inflows and outflows that reveal whether the current operating plan will meet the organization's financial objectives.
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Budget slack
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A phenomenon whereby individuals misrepresent information to secure excess resources.
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Budgeting
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The process of preparing plans (budgets) to guide operations, and projecting the financial results.
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Budgeting games
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Attempts by managers to manipulate information to have targets set lower so that they are more easily achieved.
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Consultative budgeting
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A method of budgeting setting that occurs when managers ask subordinates to discuss their ideas about the budget but no joint decision making occurs.
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Continuous budget
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A budget that is continuously updated as the current period is dropped from the budget and a new period is added
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Efficiency variance
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An estimate of the increase in costs caused by excessive use of labor or materials.
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Financial budgets
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Those budgets that identify the expected financial consequences of the activities summarized in the operating budgets
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First-level variance
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Difference between the actual costs and the master budget costs for individual cost items
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Flexible budget
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Reflects a cost target or forecast based on the level of volume that is actually achieved
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Flexible budget variances
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Variances from the target level of costs adjusted for the actual level of activity
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Incremental budgeting
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A budgeting process that bases a period's expenditure level for a discretionary item on the amount spent for that item during the previous period.
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Operating budgets
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The document that forecasts revenues and expenses during the next operating period including monthly forecasts of sales, production, and operating expenses.
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Participative budgeting
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A method of budget setting that uses a joint decision- making process in which all parties agree about setting the budget targets.
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Periodic budget
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A budget that is prepared for a given period, such as a quarter or a year.
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Price Variances
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The difference between the amount paid for a resource and the amount that would have been paid if the resource had been purchased at its standard price.
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Planning variance
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The difference between the planned and flexible budget amount for some item
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Pro forma financial statements
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The projected statement of cash flows, balance sheet, and income statement.
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Quantity variances
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The difference between the amount of a resource used and the amount allowed, given the level of production costed at the standard cost of the resource.
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Rate (price) variance
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An estimate of the increase in costs caused by paying more than the standard amount per unit of direct labor or materials
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Sales mix variance
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A difference between planned and actual revenue caused by a difference between planned and actual product mix
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Sales price variance
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A difference between planned and actual revenue caused by a difference between planned and actual prices for one or several products
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Sales quantity variance
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Computed for each product because the volume of sales was different than planned. A difference between planned and actual revenue caused by a difference between planned and actual quantity levels.
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Second-level variances
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Second level variances include both a planning variance and a flexible budget variance that sum to the first-level variance.
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Sensitivity analysis
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The process of selectively varying a plan's or a budget's key estimates for the purpose of identifying over what range a decision option is preferred.
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Third-level variances
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Third-level variances include quantity and price variances that sum to, and therefor explain, the flexible budget variances.
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Variance
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the difference between an actual amount and a target or planned amount.
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Variance analysis
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a set of procedures managers use to help them understand the source of variances
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What-if analysis
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A process of exploring the effects of changes in estimates on predictions in a financial model.
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Zero-based budgeting
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A budgeting process that requires proponents of discretionary expenditures to continuously justify even expenditure.
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CHAPTER 11
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STARTS HERE
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Accounting rate of return
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An accounting-based measure used to approximate the return on investment; computed by dividing a project's average accounting income by the investment level
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Capital budgeting
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A systematic approach to evaluating an investment in a long term, or capital, asset.
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Compound growth
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When an amount of money is invested and left to accumulate for multiple periods, the rate of growth is compounded because interest is earned on the interest earned in previous periods.
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Cost of capital
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The return that the organization must earn on its investments to meet its investors' return requirements. Also called risk-adjusted discount rate.
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Discounting
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The process of computing present value.
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Economic value added
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The estimated outcome of a decision computed by weighting different possible outcomes by their probability of occurring.
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Expected value method
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The estimated outcomes of a decision computed by weighting different possible outcomes by their probability of occurring.
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Future value
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The amount that today's investment will be after a stated number of periods at a stated periodic rate of return.
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High low method
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beings by asking the planner to estimate the most likely effect of a decision, and then to estimate the highest and lowest possible values that could occur.
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Inflation
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A general increase in the price level.
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Internal rate of return
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The actual rate of return expected from an investment
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Investment
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The monetary value of the assets that the organization gives up to acquire a long-term asset
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Net present value
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The sum of the present values of all the cash inflows and cash outflows associated with a project
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Payback method
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The number of periods needed to recover a project's initial investment
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Period annuity
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An investment that promises a constant amount each period over n periods
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Post-implementation audit
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The process of revisiting the decision to purchase a capacity-related resource to determine whether expectation underlying the acquisition of the resource where achieved.
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Present value
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A future cash flow's value at time zero
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Profitability index
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A variation on the net present value method, computed by dividing the present value of the cash inflows by the present value of the cash outflows.
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Real options
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Analysis of the value of an option based on the volatility of the future value of the asset underlying the option.
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Return
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The increased cash inflows in the future that are attributable to the long-term asset.
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Sensitivity analysis
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The process of selectively varying a plan's or a budget's key estimates for the purpose of identifying over what range a decision option is preferred
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Time value of money
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The concept stating that amounts of money received at different periods of time must be converted into their value on a common date to be compared.
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What-if analysis
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A process of exploring the effects of changes in estimates on predictions in a financial model
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