Business Acumen Comp Professional Flashcards
 What are the key competencies for compensation professionals?
Understanding HR
Mastering resource management
Understanding finance

Which of the following is a compensation competency for financial management?
A Manages procurement and contracting
B access is current and future staffing needs
C Sources appropriate data for fact-based decision making
D Effectively partners with colleagues
A . manages procurement and contracting
Which of the following best describes an employee with strong business acumen?
A. Task oriented, cautious, perfectionist
B. Extroverted, impulsive, intelligent
C. Inquisitive, insightful, confident
D. Timid, ignorant, well-intentioned
C. Inquisitive insightful confident
How can the compensation professional address emotional reactions from stakeholders?
A. Describe how the compensation plan is in alignment with the organizational culture
B. Present the negotiation strategy to explain how the plan was developed
C. Offer reassurance that the plan is the employees best interest
D. Focus on the data and the impact on the bottom line
D. Focus on the data and the impact on the bottom line
How might business acumen lead to career development
A. Develop confidence in decisiveness and compensation plan design
B. Interact successfully with other business functions for a lateral career move
C. Become an expert in the overall business strategy to gain an audience with the executive leader ship
D. Influence others to support the compensation perspective
A. Develop confidence and Decisiveness in the compensation plan design
Define competitive strategy
Strategy is the broad framework of principles and approaches that guide the day-to-day decisions affecting the business, including how a company positions itself in the market
What are the three focus areas of competitive strategy?
Operational excellence
product service leadership
customer intimacy
Define operational excellence
Price cost based strategy that can include a combination of price, quality, dependability, and ease of purchase, minimizing waste and rewarding efficiency
Lean, six sigma, process focused
Define product/service leadership
Innovation based strategy that focuses on product development and marketing exploration, creating the best products, generating more and better ideas and commercializing them faster than other competitors
Define customer intimacy
Solutions based strategy that focuses on creating results for carefully selected customers by building bonds to meet or exceed customer needs in order to build loyalty
Example: grocery store develops discount system based on customer requests
Defined the correlation in the relative market share four box
Name the four market positions and where they fit in the box
Question mark - Low market share high-growth
Star - High market share high growth
Dog - Low market share low growth
Cash cow - Hi market share low growth
Name the four phases in the business lifecycle
Start up, growth, mature, decline
What is captured in a mission statement?
A, goals, directions and policies
B, plan to generate revenue
C, Intention or purpose of the business
D. How an organization works and who they are
C, Intention or purpose of the business
What question can be answered by looking at an organizations profit model?
A. Why will customers pay for our services
B. Why are we in business
C. Who are we
D. What kind of organization do we want to create
A. Why will customers pay for our services
Which of the following is a customer intimacy strategy?
A. Computer manufacturer creates high-volume, low price laptops for schools to send home with students
B. Grocery chains loyalty program generates coupons based on individual shoppers purchases
C. Fast food restaurant has consistent menus and food that is prepared according to uniform standards
D. An automobile company develops low cost fuel efficient vehicles incorporating the latest technology for comfort and convenience
B. Grocery chains loyalty program generates coupons based on individual shoppers purchases
What is the definition for a cash cow market position?
A. Hi market share and low growth potential
B. Low market share and high growth potential
C. Hi market share and high market potential
D. Low market share and low market potential
A. High market share and low growth potential
A company that manufactures household cleaners has recently patented a plant-based antibacterial bathroom cleaner. Although they have been in business for 20 years, they are looking to break into this up-and-coming market. They’re ramping up their marketing campaign to include free sample distributions and coupons. Which phase of the business lifecycle describes this company?
B. Growth
Why is it beneficial for an organizations compensation policy to be in alignment with its overall business strategy?
A. Organizations that pay above market are at higher risk for excessive compensation practices
B. Compensation is built on fixed and variable expenses that determine the competitive strategy
C. Most compensation professionals have additional responsibilities I need to be able to address business concerns for multiple angles
D. Compensation usually represents a significant expense in the budget
D. Compensation usually represents a significant expense in the budget
Why do organizations use financial reports
Standardize data across companies in industries
Promote consistency of financial communication
Provide information to key constituents (leaders, managers, shareholders, lenders, government regulators)
Name the types of financial reports
Annual report
Quarterly report
Proxy and definitive 14 A
What’s the difference between the annual report and the quarterly report?
Annual report shows a full 12 month period Compared to the previous years
The quarterly report shows financial results for each three month period During the fiscal year - 
Quarterly reports are less detailed than annual reports
What two sections of the proxy definitive 14 a are important to the compensation professional?
- The compensation discussion and analysis section to CDNA or the compensation committee of the board of directors must disclose, discuss and outline how the top executives of a company are paid
-A section on qualitative and quantitative risk related to the company and the markets in which it conducts business
What are the three most important financial statements
- balance sheet
- Income statement
- Cash flow statement
Describe the balance sheet
Show statement of financial position as a specific date
List what is owned, what is owed, and equity
Shows the book value of a company
Represents the financial health of a company
Describe the income statement
Covers a period of time
Shows revenues earned and expenses incurred over a period of time
Shows the profitability of a company
What Is another name for the income statement
Profit and loss or P&L
Describe the cash flow statement
Explains the change during the period in cash and cash equivalents
What are the three sources of capital
Profits, money that comes in from sales
Equity, money that investors pay to own share of the business
Debt, money that is borrowed, usually in the form of loans or notes
What are the four components to the time value of money
PV present value
FV Future value
N Period of time
% Interest rate
Define accrual accounting
Revenues and expenses are recorded when they occur, regardless of when the cash flows.
Which of the following statements applies to annual reports
A. Compares the current 12 month period to the same time in previous years
B. Breaks data into three month period for easy comparison
C. Contains fewer details than the quarterly report
D. Always follows a January to December calendar
A. Compares the current 12 month period to the same time in previous years
Which financial statement shows the book value of the company
A. Income statement
B. Cash flow statement
C. Fiscal sheet
D. Balance sheet
D. Balance sheet
Which of the following is an example of accrued revenue
A. Parts are scheduled for shipping and invoicing in two weeks, and sale is recorded today
B. Parts shipped an invoice today or not recorded is the sale until payment is received
C. Parts shipped an invoice today I recorded as a sale, even though payment is expected two weeks later
D. Parts of been ordered but sale is not recorded until payment has been received
c. Part shipped an invoiced today are record as a sale even though payment is expected two weeks later
What is considered in forecasting
A forecast is the best guess of what the future holds for an organization.
Historical accounting and sales data, external factors such as market conditions and economic indicators
What are the three forecasting questions
Profit
Growth
Investment
Name the important financial concepts that round out how compensation and finance are related
Cost analysis
Profit measures
Cost leverage
Operating profit
Marginal cost
What two types of costs are covered under cost analysis
Fixed costs
Variable costs
Name the six profit measures
- Revenue
- Gross profit
- EBIT
- EBITDA
- Net income
- Earnings per share
Define cost leverage
The relationship between revenue and cost.
If an organization grows its revenue faster than its cost, the profit growth will accelerate
Balance between revenue and cost
Define operating profit
EBIT - Earnings before interest and taxes
Define marginal cost
If revenue accelerates faster than cost or you have a high fixed cost, the cost per unit sold will decrease as you produce and sell more
What metrics show working capital efficiency
Accounts receivable turnover/days receivable
Inventory turnover/days inventory
Payable turnover/days outstanding
What are the market metrics (stock ratios)
Price to earnings ratio = Stock price/net earnings per share
Price to EBI tea/EBITDA ratio = Stock price/EBIT or EBITDA per share
Price to revenue ratio = Stock price/net sales per share
Market to book = Stock price/book value per share
TSR (Total shareholder return) - Measures total return shareholders of earned on their investment
Define return on capital
Describes how effectively the organization is invest in capital
What Metrics are used to measure return on capital
Return on equity,
return on assets,
return on capital/invested capital,
economic value added
What are the four focus areas of a balanced scorecard
1 financials
2. Customers
3. Internal processes
4. Innovation and learning
What are the three main components to budgeting
- Amount of revenue
- Cost to generate revenue
- Other expenses
What is the definition of forecasting?
A. A plan for expenses and investments for the next year
B. The best guess of how the organization will perform in the future
C.
A summary of internal factors based on prior years
D. An estimate of the market for the upcoming quarter
B. A best guess of how the organization will perform in the future
Which of the following would not be used for business analytics
Statistical analysis
Modeling
Quantitative analysis
Intuition
Intuition
Which profit measure calculate how much the organization earns before financing the business?
Gross profit
EBIT
Net income
EBITDA
EBIT
What does the price to revenue metric measure?
Stock price/EBIT per-share
Stock price/book value per share
Stock price/net earnings per share
Stock price/net sales per share
Stock price/net sales per share
Which of the following is an example of a variable cost
Shipping Expenses
Corporate salaries
Rent
Audit fees
Shipping expenses
What best describes the link between forecasting and budgeting
Budgeting uses forecasting to solidify the financial plan
What’s the hierarchy of affective communication?
Awareness
Understanding
Acceptance
Commitment
Action
What are the attributes of effective Collaboration
Contribute to organizational goals
Identify key influencers and decision makers
Consider how to help them achieve their objectives
Give special consideration to partnerships with finance
