MA in an ET&A Environment, Blackboard

Question 0

What is management accounting in a new venture?

Answer 0

In a new venture management accounting helps founders develop a sustainable business model.

Question 1

What is management accounting in established companies?

Answer 1

In established companies, management accounting helps managers develop and test new strategies, make operational decisions, and achieve strategic goals.

Question 2

A business model is sustainable when…

Answer 2

It generates enough revenues and contributions to cover costs and to satisfy capital providers.

Question 3

The purpose of management accounting is…

Answer 3

To help managers and entrepreneurs create and maintain a sustainable business model.

Question 4

Financial accounting…

Answer 4

Provides financial information to external parties who rely on published financial statements as their primary source of information.

Question 5

Managerial accounting…

Answer 5

Assists those inside the organization to create a business model and manage more effectively and efficiently.

Question 6

What is the business golden rule for accountants?

Answer 6

The benefit from using information must exceed the cost of collecting and reporting it.

Question 7

What activities does management accounting support?

Answer 7

Shaping ideas, strategy and business models
Analysis and decision making
Planning and coordinating
Performance management and control

Question 8

Management accounting data is often…

Answer 8

Forward looking, less precise and tailored to fit managers and entrepreneurs’ needs.

Question 9

Management accounting’s measurement scope…

Answer 9

Is increasing and changing over time. It includes both financial information (revenues, costs, cash flows and assets) and nonfinancial information (operational metrics about customers, processes, etc).

Question 10

In response to a manufacturing manager responsible for the production cost, the management accountant would…

Answer 10

Provide the budgeted and actual material, labor and factory overhead costs.

Question 11

What three attributes of information guide management accountants when selecting which measurement procedures to follow and what information to provide?

Answer 11

Technical, behavioral, and cultural.

Question 12

What is the technical attribute?

Answer 12

This states that the information provided should enhance the manager’s understanding of business phenomena being studied.

Question 13

What is the behavioral attribute?

Answer 13

This is the aspect that the information provided should encourage actions that are consistent with vision, mission and goals.

Question 14

What is the cultural attribute?

Answer 14

This is when management accounting supports, reflects, and helps create a set of shared values, beliefs, and mindset in an organization culture.

Question 15

What is organization culture?

Answer 15

Organizational culture guides the behavior of people at the subconscious level, and makes behaviors easier to sustain because people believe in them.

Question 16

What is back cast?

Answer 16

Working backward from the minimum required performance results. Accountants create models of revenue, cost and assets that yield desired results. They delineate the things that would have to happen for those results to occur.

Question 17

What are critical strategic assumptions within the back cast?

Answer 17

Which customer group will buy?
The distinguishing product characteristics (quality, cost, time) that provide value to the target customer group.
The price that target customers will pay.
The market size and % of market needed.
The costs incurred to produce, sell and serve customers.

Question 18

What are drivers of performance?

Answer 18

A crucial element to understand if you do back casting. These are the factors that decision makers must target with specific action plans.

Question 19

What does the Balanced Scorecard do?

Answer 19

A BSC translates lofty vision statements and strategic plans into action plans that can be understood and implemented.

Question 20

What are the four elements of an action plan?

Answer 20

What will be done?
By whom?
When will it be done?
What resources are available?

Question 21

What are lead measures?

Answer 21

Lead measures are measures of action plans that are supposed to generate desired outcomes. By monitoring them, decision makers can take corrective action before the wrong outcomes occur.

Question 22

What are lag measures?

Answer 22

Lag measures, like return on assets, are measures of final desired outcomes. By monitoring these, decision makers can test if action plans result in desired outcomes.

Question 23

What four perspectives does the BSC divide the company into?

Answer 23

Final perspective (measures financial consequences of action plans)
Customer perspective (measures customer's perception of the company and its offerings)
Internal business process perspective (identifies the business processes most important to providing customer value)
Learning and growth perspective (establishes the capabilities that the organization needs to innovate and grow in the long run)

Question 24

Emerging trends in management accounting?

Answer 24

Understanding how the customer value proposition is delivered
Analyzing the cost and value of products and services
Analyzing the profitability of customers by studying the resources consumed to service and support them, etc

Question 25

What is the importance of return on assets?

Answer 25

ROA is an important performance metric for the operations of a profit seeking organization. It compares profits earned to assets used to produce profits.

Question 26

What is the formula for ROA?

Answer 26

ROA = Profits/Assets

Question 27

In managerial accounting, we compute ROA based on…

Answer 27

Operating income and operating assets. Operating income is usually a before tax number.

Question 28

Return on Assets = Return on Sales x Asset Turnover

Answer 28

ROS (AKA Profit Margin) = Operating profit/revenue (sales and service revenues)
ATO = Revenue/Operating Assets

Question 29

Return on Sales/Profit Margin…

Answer 29

Is a measure of efficiency in generating operating profits. Efficiency = relationship between inputs and outputs, or how well organizational resources were used to generate product, services, and profit.

Question 30

Interpret ROS/Profit Margin…

Answer 30

McDonald’s 2012 ROS was 31.2%. That means for each dollar of sales McDonald’s generates, it has about $.312 of operating profit before taxes. Compare this to others in the industry to see how well they are managing their operations.

Question 31

Asset turnover measures…

Answer 31

How efficiently assets generate revenues. ATO shows the revenue dollars generated by each dollar of assets. Usually, knowledge and technology companies typically have higher ATOs than brick and mortar companies like McDo.