3.7.3 Non-financial Perfomance Data

Question 1

What is Capacity utilisation?

Answer 1

Measures the extent to which a business uses the resources available to it

Question 2

What is absenteeism?

Answer 2

Occurs when an employee is not present at his or hers place of work

Question 3

What are unit labor costs?

Answer 3

Measures the labor costs per unit of output produced

Question 4

What is laybour turnover?

Answer 4

Is the percentage of a business employees who leave the business over some period of time (normally a year)

Question 5

What is laybour or employee retention

Answer 5

Is the extent to which a business holds onto its employees

Question 6

What are the limitations of financial data

Answer 6

-Tend to look backwards at historical financial performance

-Focus on measures that are possibly most important to shareholders than business management

-Not the best way of understanding how a business is performing in terms of key competitive performance

Question 7

How can you judge a businesses performance without financial information

Answer 7

Efficiency (unit costs)
Laybour productivity
Capacity utilisation
Break even output
Quality(reject)
Quality (lead time)

Labour turnover
Unit laybour costs
Absenteeism rate
Revenue per employee
Staff retention rate
Job satisfaction

Market share
Sales per employee
Sales growth
Customer retention rate
Brand reputation and awareness

Environmental performance
Compliance regulation
Health and safety
Social media reach

Question 8

Short termism

Answer 8

Is where a business prioritises short-term rather than long term performance

Question 9

Core compliancies

Answer 9

The unique ability or abilities of a business to enable it to achieve a competitive advantage

Question 10

What performance measures does short-termism emphasise

Answer 10

Share price
Revenue growth
Gross and operating profit
Unit costs and productivity
Return on capital employeed

Question 11

What long term measures does short term ism not emphasise

Answer 11

Market share
Quality
Innovation
Brand reputation
Employee skills and experience
Social responsibility and sustainability

Question 12

Why might businesses be concerned with short-term performance

Answer 12

Stock market
Investor focus on latest financial performance

Reliance on bonuses based on short-term performance

Frequent changes in leadership strategy

Question 13

Possible indicators of short-termism

Answer 13

Bonuses based on short term objectives
Low investment in R&D

High dividend payments rather then reinvesting profits

Overuse of takeovers rather then internal growth

Question 14

Elkington’s triple bottom line (profit, people, planet)

Answer 14

A way of assessing business performance based on three important areas: profit people and planet

Question 15

Sustainable production

Answer 15

Occurs when the supply of a product does not impose costs on future generations, for example depleting non-renewable resources

Question 16

Social responsibility

Answer 16

Is managing a business so as to take into account the Interest of society in general and especially these groups and individuals with a direct interest in the the business

Question 17

Social responsibility

Answer 17

Is managing a business so as to take into account the Interest of society in general and especially these groups and individuals with a direct interest in the the business

Question 18

Fair trade

Answer 18

Is a social movement that exists to promote improved trading terms and living conditions for products of products in less- developed countries

Question 19

Fair trade

Answer 19

Is a social movement that exists to promote improved trading terms and living conditions for products of products in less- developed countries

Question 20

The traditional “bottom line”

Answer 20

Business assumed to be profit maximisers

Traditional measure of business success

Closely linked with business value (eg share price)

Often the basis for financial incentives (eg bonuses)

Question 21

The traditional “bottom line”

Answer 21

Business assumed to be profit maximisers

Traditional measure of business success

Closely linked with business value (eg share price)

Often the basis for financial incentives (eg bonuses)

Question 22

The “triple bottom line” suggests there is more to business success than profit

Answer 22

It aims to measure the financial, social and environmental performance of a business over a period of time

Question 23

Triple bottom line- profit

Answer 23

Familiar to managers
Identified from income statement
Audited= reliable figure

Question 24

People - Triple bottom line

Answer 24

Measures extent to which businesses is socially responsible

Hard to calculate and report reliability and consistency

Question 25

Planet -triple bottom line

Answer 25

Measures the impact of business on environment

More tangible- eg emissions

Use of sustainable inputs

Question 26

Benefits and value of the triple bottom line

Answer 26

Encourages business to think beyond profit ( narrow focus)

Encourages CSR (corporate social responsibility)

Supports measurement of environmental impacts and extent of sustainability

Question 27

Drawback and criticisms of the triple bottom line

Answer 27

Not very useful as an overall measure of business performance

Hard to reliably and consistently measure people and the planet bottom lines

No legal requirement to report it- so take up has been poor