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52 Cards in this Set

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Balance Scorecard
strategic performace measurement and mgmt framework for implementing strategy by transleting and organization's mission into a set of measures
4 perspective of Balance Scorecard
Financial,
internal business process,
customer,
learning and growth
Purpose of performance measure (5)
Resource allocation
Incentive compensation
divisional and BU evaluation
Budgeting and planning
setting target
Components of B/S
Strategic objective - Statement of what strategy must be achieved
performance measure - How success will be measured
Baseline performance - current level
target - level of performace needed
strategic initiatives -Key action needed to achieve objective
Characteristics of the B/S
Strategy focus
Balanced
Financial and nonfinancial measures
cause and effect linkage
unique to the strategy
Strategy Map
are diagrams of the cause and effect relationship between strategic objective
Value based mgmt metrics
ROI
Economic Profit
EVA
Cash flow ROI
Risidual Income
ROI
Net Income / Ave Invested capial
Dupont ROI
(Net Income/total asset)
or
(Net Income/Sales) / (Sales/Ave investment)

Return on sales X Asset turnover
Residual Income
Net Income - (Invested capital x Cost of Capital)
When residual income is 0, ROI and cost of capital are same
Required Rate of return and Risidual Income
Required rate of return goes up, residual income goes down

Risidual income is $0, where ROI = Required rate of return
Economic Profit
Accounting profit - cost of capital
EVA formula
NOPAT -(TA-CL)X WAAC
Free Cash Flow
NOPAT
+ Dep and amortization
- Change in WC requirement
- Capital expenditure
Profitablility Ratios
Gross Margin
Operating Profit
Return on asset
Return on Equity
Dividend payout
Gross margin ratio
Gorss profit/Net sales
Profit Margin
net Income after int and tax / Net sales
Operating profit
Operating income (EBIT)/ Net Slaes
Return on Asset
Net Income After Interest and tax/ Ave total asset
Retun on Equity
Net Income After Interest and tax/ Ave commons shareholder equity
Dividend payout ratio
Divident per CS/earnings per CS
Asset Utilization ratios
Receivable turnover
Ave collection period
Inventory turnover
Fixed asset turnover
Total asset turnover
Receivable turnover
Net credit sales/ Ave AR

# of time AR balance is collected
Average collection peirod
Average AR/ Ave sales per day
Inventory turnover
COGS/ Ave inventory

Efficiency of inventory usage
Fixed Asset turnover
Sales/ Ave. Fixed asset
Liquidity Ratios
Measures the short term ability of the firm to pay its' maturing obligations and to meet unexpected needs for cash
Current Ratio
Current Asset/ Current liabilities
Quick/Acid test ratio
Current asset - inventory / Current liablities
Debt Utilization ratios
Debt to total asset
Debt to total equity
Times interest earned

Effectiveness with which management finances the asest of the firm
Debt to total assets
Total liabilities/Total assets
Debt to total equity
Total liabilities/ total equity
Time Interest earned
Earning before tax and interest / Interest expense
Market Ratios
Price Earning

Market/Book Value
Price Earning
Prices per share/ Earnings per share
Market/Book value
Market value/ Book value

Book value ( CS equity / # of CS outstanding)
Horizontal analysis
also known as trend analysis

Compares financial statements over a peirod of time

(current year - base year)/Base year
Vertical analysis
Called common size analysis

express each item as % of base $

Enables you to compare companies of different size
Limitations of ratios
1. Firms may not be comprable due to size, diversification, use of GAAP, and different year end
2. not reliable industry average
3. variation in calcuation
4. estimates may distorts results
5. only financial measures is not a balanced view point
Types of benchmarking
Internal
Competitive
Functional/Industry
Generic
4 cause of defects (fishbone/ Ishikawa)
Human factors
methods and design factors
machine related factors
matrial and component factors
Pareto Chart
Bar graph that ranks causes of process variation by the degree of impact on quality.

80% of problems comes from 20% of causes
Poka Yoke
making workplace mistake proof
4 costs of quality
Prevention cost
Appraisal cost
Internal failure cost
external failure cost
Prevention cost
Do the job right the first time
quality engineering, trianing, circles
Statistical process control activity
supervision of prevention acitvities
Quality datat gathering, analysis, reporting
quality improvement project
technical support for supplier
audits of effectiveness of quality system
Appraisal cost
Cost of testing and inspecting
Internal Failure cost
Substandard products are discoverd before delivery
scrap, spoilage, rework, rework labor, Overhead, reinspection, retest downtime, disposal of defective product
debugging Software
reentering data
External failure cost
cost incurred when product dont meet customer requirement
cost of field servicing, handling complaints
Warranty repairs, replacement
Product recall
Liability from defective product
Return allowance
Lost sales
Business process mgmt lifcycle
Design
Modeling
Executing
Monitoring
Optomizing
Risk of outsourcing (6)
Quality risk
Language risk
Information secuity risk
Intellectual property risk
Public opinion risk
social responsibility risk
Theory of constraint
Method to maximum operating income when faced with bottleneck operation.

Objective is to increase throughput contribution while decreasing invenstment and operating cost
Throughput contribution
Revenue minus Direct Material cost