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52 Cards in this Set
- Front
- Back
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Balance Scorecard
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strategic performace measurement and mgmt framework for implementing strategy by transleting and organization's mission into a set of measures
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4 perspective of Balance Scorecard
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Financial,
internal business process, customer, learning and growth |
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Purpose of performance measure (5)
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Resource allocation
Incentive compensation divisional and BU evaluation Budgeting and planning setting target |
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Components of B/S
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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 |
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Characteristics of the B/S
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Strategy focus
Balanced Financial and nonfinancial measures cause and effect linkage unique to the strategy |
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Strategy Map
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are diagrams of the cause and effect relationship between strategic objective
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Value based mgmt metrics
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ROI
Economic Profit EVA Cash flow ROI Risidual Income |
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ROI
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Net Income / Ave Invested capial
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Dupont ROI
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(Net Income/total asset)
or (Net Income/Sales) / (Sales/Ave investment) Return on sales X Asset turnover |
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Residual Income
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Net Income - (Invested capital x Cost of Capital)
When residual income is 0, ROI and cost of capital are same Spread = ROI-Cost of Capital |
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Required Rate of return and Risidual Income
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Required rate of return goes up, residual income goes down
Risidual income is $0, where ROI = Required rate of return |
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Economic Profit
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Accounting profit - cost of capital
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EVA formula
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NOPAT -(TA-CL)X WAAC
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Free Cash Flow
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NOPAT
+ Dep and amortization - Change in WC requirement - Capital expenditure |
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Profitablility Ratios
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Gross Margin
Operating Profit Return on asset Return on Equity Dividend payout |
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Gross margin ratio
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Gorss profit/Net sales
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Profit Margin
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net Income after int and tax / Net sales
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Operating profit
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Operating income (EBIT)/ Net Slaes
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Return on Asset
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Net Income After Interest and tax/ Ave total asset
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Retun on Equity
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Net Income After Interest and tax/ Ave commons shareholder equity
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Dividend payout ratio
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Divident per CS/earnings per CS
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Asset Utilization ratios
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Receivable turnover
Ave collection period Inventory turnover Fixed asset turnover Total asset turnover |
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Receivable turnover
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Net credit sales/ Ave AR
# of time AR balance is collected |
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Average collection peirod
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Average AR/ Ave sales per day
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Inventory turnover
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COGS/ Ave inventory
Efficiency of inventory usage |
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Fixed Asset turnover
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Sales/ Ave. Fixed asset
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Liquidity Ratios
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Measures the short term ability of the firm to pay its' maturing obligations and to meet unexpected needs for cash
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Current Ratio
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Current Asset/ Current liabilities
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Quick/Acid test ratio
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Current asset - inventory / Current liablities
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Debt Utilization ratios
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Debt to total asset
Debt to total equity Times interest earned Effectiveness with which management finances the asest of the firm |
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Debt to total assets
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Total liabilities/Total assets
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Debt to total equity
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Total liabilities/ total equity
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Time Interest earned
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Earning before tax and interest / Interest expense
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Market Ratios
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Price Earning
Market/Book Value |
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Price Earning
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Prices per share/ Earnings per share
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Market/Book value
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Market value/ Book value
Book value ( CS equity / # of CS outstanding) |
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Horizontal analysis
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also known as trend analysis
Compares financial statements over a peirod of time (current year - base year)/Base year |
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Vertical analysis
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Called common size analysis
express each item as % of base $ Enables you to compare companies of different size |
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Limitations of ratios
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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 |
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Types of benchmarking
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Internal
Competitive Functional/Industry Generic |
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4 cause of defects (fishbone/ Ishikawa)
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Human factors
methods and design factors machine related factors matrial and component factors |
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Pareto Chart
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Bar graph that ranks causes of process variation by the degree of impact on quality.
80% of problems comes from 20% of causes |
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Poka Yoke
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making workplace mistake proof
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4 costs of quality
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Prevention cost
Appraisal cost Internal failure cost external failure cost |
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Prevention cost
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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 |
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Appraisal cost
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Cost of testing and inspecting
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Internal Failure cost
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Substandard products are discoverd before delivery
scrap, spoilage, rework, rework labor, Overhead, reinspection, retest downtime, disposal of defective product debugging Software reentering data |
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External failure cost
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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 |
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Business process mgmt lifcycle
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Design
Modeling Executing Monitoring Optomizing |
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Risk of outsourcing (6)
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Quality risk
Language risk Information secuity risk Intellectual property risk Public opinion risk social responsibility risk |
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Theory of constraint
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Method to maximum operating income when faced with bottleneck operation.
Objective is to increase throughput contribution while decreasing invenstment and operating cost |
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Throughput contribution
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Revenue minus Direct Material cost
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