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BAR > BAR: NonFinancial and NonGAAP Measures of Performance > Flashcards

BAR: NonFinancial and NonGAAP Measures of Performance Flashcards

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1
Q

Customer Retention Rate

A

summarizes the number of percentage of customers who continue to use an entity’s products or services for a specified time. To maintain or improve this rate, businesses typically need to improve product offerings and value. (i.e. loyalty programs, multiyear contracts)

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2
Q

Employee turnover

A

Represents the number or percentage of workers/employees who voluntarily or involuntarily (or both) leave the business within a certain time frame (usually one year) and are replaced by new employees.

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3
Q

Labor productivity rate

A

Indicates the # of units of work completed by a worker in a defined period of time (i.e. man hours). (Total value of output for a specified period of time divided by the total number of labor hours)

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4
Q

Ticket response time

A

Identifies how long it takes customer service to first respond to a ticket.

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5
Q

Free cash flows (FCF)

A

Represent the after-tax cash available to capital providers (i.e. investors) after accounting for operating expenses and investment in fixed and working capital

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6
Q

Calculation of and uses of free cash flow

A

Calculation (Net income + noncash expenses +/- working capital - fixed capital); Uses (Repayments of LTD, Dividends, Stock repurchases)

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7
Q

Core earnings

A

a concept that was developed by Standard and Poor’s to identify “Business-as-usual” income generate by normal, recurring business operations; not recognized as a GAAP concept but used by management and investor to assess the profitability of the underlying business.

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8
Q

Calculation of core earnings

A

Pretax earnings - nonrecurring income - pension gains + loss on asset sales

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9
Q

Adjusted net income for nonrecurring expenses

A

is calculated by removing nonrecurring items from net income to arrive at an amount that represents typical (i.e. recurring) net income

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10
Q

Discontinued operations

A

A type of nonrecurring expense; gain/loss from the disposal of a component (i.e. segment) of an entity that has a significant effect on the entity’s operations and financial results

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11
Q

Unusual/infrequent items

A

A type of nonrecurring expense; items that are either unusual in nature or infrequent in occurrence (eg, restructuring charges)

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12
Q

Change in estimate

A

A type of nonrecurring expense; a gain or loss resulting from a voluntary change in an entity’s estimation policies, such as a change in depreciation methods (eg, straight-line to double declining)

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13
Q

Cost of quality

A

a philosophy with three core tenets; 1) that failures have causes 2) preventing failures is cheaper than fixing it later 3) measuring a firm’s performance regarding cost of quality helps the firm

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14
Q

Prevention costs

A

(a type of quality cost) use high-quality materials, provide employee training, require routine preventative maintenance, require supplier education/certifications

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15
Q

Detections/Appraisal Costs

A

(a type of quality cost) inspection of raw materials, work-in-progress, finished goods; depreciation expense of testing equipment; supervision of testing team

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16
Q

Internal failures costs

A

(a type of quality cost) disposing of scrap due to wasted materials, reworking defective units, re-inspecting and retesting after rework

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17
Q

External failure costs

A

(a type of quality cost) warranty, costs, product liability and product recall costs, lost future sales and damaged reputation, lawsuits

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18
Q

Conformance costs

A

(i.e. prevention + detection/appraisal cots)

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19
Q

Nonconformance costs

A

(i.e. internal + external failure costs)

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20
Q

Six-sigma quality

A

a statistical measure of the percentage of products that are in acceptable form, based on standard deviation measures

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21
Q

Total quality management (TQM)

A

an entity-wide effort to continuously improve the ability to deliver high-quality products and services through systematic analysis; thus, it includes insights from suppliers as well as employees

22
Q

Theory of constraints (TOC)

A

bottleneck; is used to maximize operating income and overcome bottlenecks in operations

23
Q

Strategy maps

A

i.e. diagrams; help to identify cause-and-effect relationships

24
Q

Decision trees

A

as a project evolves, conditions evolve that require new decisions to be made

25
Q

Value-based management (VBM)

A

seeks to determine each activity’s financial value (or contribution) to the firm

26
Q

Value chain

A

a sequence of processes that create a product or service and then identifies production areas that can be redesigned to improve productivity or quality or can be eliminate altogether

27
Q

Value proposition

A

measure of the value added for the customers by the firm’s competitive advantages

28
Q

Benchmarking

A

evaluating performance of an entity’s products, services, and/or processes on an ongoing basis (i.e. continuous improvement), relative to the performance within and outside the organization.

29
Q

Internal benchmarking

A

compares relative performance of division, stores, product lines, etc.

30
Q

Technical benchmarking

A

compares against competitors, often using a SWOT analysis to identify threats and opportunities

31
Q

Customer and competitive benchmarking

A

focuses on intangibles, such as adding value, ESG attributes, etc.

32
Q

Industry benchmarking

A

focuses on higher level, often assessing financial and/or process performance

33
Q

Strategic

A

compares an entity’s strategy to competitors’, similar to comparing processes

34
Q

Benchmark cycle

A

1)identify current internal performance level 2) gather current external performance level data (best practice 3) compare entity performance level to best practices level 4) implement and monitor improvement(s) 5) repeat as needed

35
Q

Advantages of benchmarking

A

improvement of competitive edge, enhancement in employee morale, identification of strengths and weaknesses, creation of new/improved products/services to differentiate from competitors

36
Q

Balance scorecard

A

a strategic management framework that translates an organization’s mission and strategy into a set of performance targets

37
Q

Financial

A

How do shareholders perceive us? Measure profitability (return on investment, residual income, etc.) revenue, profit, or asset growth, and financial soundness (debt and equity ratios, etc.)

38
Q

Learning & Growth (Innovation)

A

Howdo our employees perceive us? Measures employee satisfaction, training, and advancement to ensure key drives of long-term ability to carry out mission are not neglected in pursuit of shorter-term objectives

39
Q

Customer

A

How do our customers perceive us? Measures customer satisfaction (eg through survey) and retention

40
Q

Internal Business Process

A

How well are we running our operations? Measures averages and variances in the cost, time, and number of defects involved in producing and delivering a product or service

41
Q

Strategic objectives

A

a statement of the firm’s goals and what is needed to achieve them

42
Q

Performance measures

A

the quantitative methods to be used to determine how much of the strategic objectives are being reached

43
Q

Baseline performance

A

how well the firm is currently doing under each performance measure

44
Q

Targets

A

the amount of improvement being sought for each performance measure

45
Q

Strategic initiatives

A

what specific changes the firm will undertake to achieve its objectives and targets

46
Q

External factors (risk)

A

macroeconomic or industry risks that affect overall industry demand or profitability

47
Q

Internal (i.e. company) factors (risk)

A

affect an individual company and that are typically related to competitive positioning or management actions

48
Q

Risk avoidance

A

involves using strategy that circumvents the risk entirely

49
Q

Risk acceptance

A

occurs when an entity takes no action and simply allows an event to occur

50
Q

Risk sharing

A

occurs when the risk burden is partially or wholly distributed to external parties

51
Q

Risk reduction

A

can include changing the operating environment (eg diversifying product offerings) or rebalancing an asset portfolio to reduce exposure to certain types of losses

52
Q

Risk profile

A

quantifies threats to an entity

BAR (10 decks)

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