Balance Scorecard Flashcards
What is Contribution Margin?
+ example
Money left after paying for variable costs.
sales - variable cost = contribution margin
Example: A lemonade costs $1 to make and sells for $3, so the contribution margin is $2.
What is Plant Utilization?
+ formula & example
How much of a factory is being used.
Example: A bakery uses 50 out of 100 ovens, so utilization is 50%. Leverage: Maximizing plant utilization reduces idle costs.
Formula: Plant Utilization = (Used Capacity / Total Capacity) * 100%.
What is Days of Working Capital?
+ formula & example
How long a company can run with its money.
Example: A store has $1,000 and spends $100 per day, so it lasts 10 days.
Leverage: More working capital means more flexibility. Formula: Days of Working Capital = (Working Capital / Daily Operating Cost).
What is Stock-out Costs?
+ formula & example + leverage
Money lost when a product is out of stock.
Example: A toy store sells out of a popular toy and loses $10,000 in sales.
Leverage: Keeping inventory balanced prevents lost sales.
Formula: Stock-out Costs = Lost Sales Revenue + Customer Dissatisfaction Costs.
What is Inventory Carrying Costs?
+ formula & example + leverage
Cost of storing products.
Example: A warehouse full of old shoes costs $500 per month to store.
Leverage: Lower inventory costs improve cash flow.
Formula: Inventory Carrying Costs = Storage Cost + Insurance + Depreciation.
What is Customer Buying Criteria?
+ example + leverage
What makes customers buy something.
Example: People buy phones based on price, brand, and battery life.
Leverage: Understanding buying criteria helps in marketing.
What is Customer Awareness?
+ formula & example + leverage
How many people know about the company.
Example: If 10 out of 100 people know a brand, awareness is 10%.
Leverage: Higher awareness leads to more sales.
Formula: Customer Awareness = (People Aware of Brand / Total Market) * 100%.
What is Customer Accessibility?
+ formula & example + leverage
How easy it is for customers to buy.
Example: If only one store sells a game, it has low accessibility.
Leverage: More accessibility increases sales opportunities. No direct formula, but measured through store locations, website reach, or delivery options.
What is Product Count?
+ formula & example + leverage
Number of products a company sells.
Example: A grocery store has 500 different types of snacks.
Leverage: A larger product range can attract more customers.
Formula: Product Count = Total Unique Items Sold.
What is SG&A Expense?
+ formula & example + leverage
Costs for running the company (marketing, rent, salaries).
Example: A store spends $5,000 on ads and rent monthly.
Leverage: Reducing SG&A improves profitability.
Formula: SG&A Expense = Selling + General + Administrative Costs.
What is Employee Turnover Rate?
+ formula & example + leverage
How often employees quit.
Example: If 5 out of 50 employees leave in a year, turnover rate is 10%.
Leverage: Lower turnover improves stability and saves hiring costs.
Formula: Employee Turnover Rate = (Employees Left / Total Employees) * 100%.
What is Employee Productivity?
+ formula & example + leverage
How much work employees do.
Example: A worker makes 10 sandwiches per hour, while another makes 15.
Leverage: Higher productivity leads to higher output and profits.
Formula: Employee Productivity = Output per Worker / Time Worked.
What is a balance scorecard (4 people)
A Balanced Scorecard is like a report card for a company. Instead of just looking at money (profits), it looks at four areas to see if the company is doing well:
Financial - How much money is made?
Internal Business Process - How well does the company operate?
Customer - Are customers happy and buying?
Learning & Growth - Are employees improving?
What is Leverage on the balance scorecard
Higher contribution margins mean more profit per unit.
Formula: Contribution Margin = Selling Price - Variable Cost per Unit.
