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Controlling & Performance management > Frequent questions > Flashcards

Frequent questions Flashcards

1
Q

How can a controller anticipate the company’s future?

A

Makes predictions through business models build on past performance and trends in the company’s data. They perform financial analysis & develop financial planning processes.
+ He is talking to people in the company, knows all departments, doesnt just sit in his office.

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2
Q

What is working capital ?

A

WC= CA-CL
- A measure of company’s liquidity. Shows short-term financial health.
Shows how much of my current liabilities can be covered by my current assets.

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3
Q

What goes under CA?

A
  • cash
  • inventory
  • Accounts Receivable
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4
Q

What goes under CL?

A
  • A/P
  • Short term borrowings
  • Accrued Liabilities
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5
Q

Strategic VS Operational controlling

A

Strategic Controlling= related to business strategy, future development (mid/long-term perspective).
Operational Controlling= day to day monitoring of business development, analysis of variances. The planning horizon is much shorter. Comparison of actual development VS the budget.

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6
Q

Relevant KPIs for Strategic controlling?

A
  • Cash Flow
  • Contribution Margin (Price-VC)
  • ROI
  • Market share
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7
Q

Relevant KPIs for Operational controlling?

A
  1. Profitability
  2. Efficiency
  3. Liquidity
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8
Q

Name relevant controlling instruments for Strategic Controlling.

A
  1. SWOT analysis
  2. Analysis of competition
  3. Portfolio analysis
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9
Q

Market Share

A

% of industry’s (market’s) total sales earned by a particular company over a specified time period.

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10
Q

Why is liquidity the most important issue?

A

Liquidity is the TOP KPI for Operations Controlling.

Liquidity brings a certain amount of stability to meet routine financial obligations .

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11
Q

What is liquidity?

A

Liquidity is the ability you have to convert any asset into cash quickly. It is also an ability to buy or sell a security without affecting the asset’s price. When you’re talking about investments, your liquidity is basically how “easy” it is to buy and sell.he degree to which an asset or security can be quickly bought or sold in the market at a price reflecting its intrinsic value. In other words: the ease of converting it to cash.

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12
Q

Planning horizon for operational controlling?

A

short term, month.

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13
Q

Classification of costs? -

A

direct/indirect, fixed/variable

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14
Q

What are the relevant questions to identify cost type, cost center, cost unit ?

A
  • Cost center: Where did the cost arise? Department/person/group of people.
  • Cost Unit: What did the cost arise FOR? Unit of product, service, time
  • Cost Type: What type of cost arose? Classification of all cost types and cost categories
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15
Q

Cost functions?

A

Costs are classified by functions:

  1. Production
  2. Marketing/Sales
  3. Administration
  4. R&D
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16
Q

Cost Center

A

Where did the cost arise? Department/person/group of people.

17
Q

Cost Unit

A

What did the cost arise FOR? Unit of product, service, time

18
Q

Cost Type

A

What type of cost arose? Classification of all cost types and cost categories

19
Q

The chain of cost classification

A

Costs&raquo_space; Functions > Cost centers > Cost Unit > Cost Type > Cost Elements (Direct/Indirect) > Further classification (Fixed / Variable)

20
Q

Is there any difference between the manager and the controller? Can a controller be a manager?

A
  • in a small company - yes.
21
Q

Fin. Acc VS Man. Acc.

A

Financial:

  • publicly reported info
  • historical
  • cases-based
  • refers to accounting standards
  • External - creditors, suppliers, customers, public (tax) authorities - outside parties. But also Internal ofc (management, staff)

Managerial Accounting -

  • confidential management info
  • forward-looking
  • model-based of decision-making
  • refers to the need of managers (presentation may be modified)
  • for manages within the organisation (top man-t, middle man-s, decision-makers)
22
Q

What is cost accounting?

A

A form of managerial accounting, to capture total cost of production by assessing the variable costs of each step of production as well as fixed costs.

23
Q

Examples of Sales KPIs

A
  • sales per head
  • cost per sale
  • cost per lead
  • market share
24
Q

Examples of Production KPIs

A
  • productivity (time per unit)
  • quality
  • # accidents
25
Q

What is the main purpose of Internal Reporting/cost accounting?

A
  1. Monitoring internal processes to support management decisions
  2. ensuring transparency of the company’s efficiency and its processes.
26
Q

3 methods of company valueation

A
  1. Asset based approach (TA-TL)
  2. Earnings based approach (=Using Multiples)
  3. Market Value approach (comparable companies)
27
Q

What is required for successful Planning & Budgeting?

A

Looking at the organization as a whole a system and understanding the relationship among it components.

28
Q

What is Planning?

A

Planning consists of
developing the objectives, timetables, performance standards
needed to implement organization’s strategy
and
assigning individual accountability for results.

29
Q

Budgeting?

A 
identifying
prioritizing
acquiring
allocating
the resources needed to carry out the plan.
30
Q

3 levels of corporate planning

A

Liquidity Level (short-term) to ensure the solvency of the company

Success Level (mid term) to ensure the profitability of the company

Potential Level (long-term) to ensure the future of the company

31
Q

Controller’s main duties

A

The preparation of the budget
To collect each departmental budget
To summarize all detailed information
To discuss the draft with the top management

32
Q

what is a business plan?

A

A Business Plan is a powerful document telling the STORY of a company; it presents the CURRENT position, the VISION for the future and the PLAN for realizing that vision. A business plan defines a certain activity over a specific period of time.

33
Q

Balance Sheet

A

The Balance Sheet reports a company‘s assets, liabilities and the shareholder‘s equity at a specific point of time
It provides the basis for COMPUTING RATES OF RETURN and evaluating its CAPITAL STRUCTURE.
It is a financial statement that provides a snapshot of what a company owns and owes, as well as the amount invested by shareholders.

34
Q

Income Statement Order

A

Total Sales
-Cost of goods sold
=GROSS PROFIT

-Sales expenses
-Adminstration expenses
- Other operating expenses
= EBITDA (Operating Profit)

-Depreciation
=EBIT

-Interest income/expenses
EBT
- Taxes
NET Profit/Loss

35
Q

Income Statement

A

An Income Statement is a financial statement that reports a company`s FINANCIAL PERFORMANCE over a specific accounting period.
Financial performance is assessed by giving a summary of how the business incurs its revenues and expenses through both operating and non operating activities.
It also shows the net profit or loss incurred over a specific accounting period.
Unlike the Balance Sheet, which covers one moment in time, the Income Statement provides performance information OVER A PERIOD d of time.

The Income Statement is divided into two parts: Operating and Non-operating activities

36
Q

Cash flow Margin

A

Cash flows from operating activities / Net sales

Indicates to the company how it converts sales into cash

37
Q

Free Cash Flow to Equity

A

FCFE=Cash from operations − Capex + Net debt issued

Indicates how much cash can be paid to the shareholders after all the expenses, investments and debt are paid

38
Q

The 6 steps of Corporate Planning

A
  1. Developing the Strategy
  2. Translating the Strategy
  3. Shaping the organization
  4. Operational Planning
  5. Controlling and lessons learned
  6. Testing and adapting

Controlling & Performance management (11 decks)

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