Performance Management Flashcards
When comparing service businesses with manufacturing businesses, what is the relevance of intangibility?
Services are intangible and it is therefore harder to measure the quality.
What are the three levels of planning and control in an organization?
- Strategic
- Tactical
- Operational
What are the six dimensions in Fitzgerald & Moons’ building block model?
- Financial performance
- Competitive performance
- Quality
- Flexibility
- Resource Utilization
- Innovation
What are the four perspectives that the Balanced Scorecard focuses on?
- Financial
- Internal
- Innovation and Learning
- Customer
What are ‘key performance indicators’?
Key performance indicators are the measures used to determine whether or not the critical success factors are being achieved.
What are ‘key performance indicators’?
Critical success factors are those areas that the business must focus on if it wishes to succeed.
In pricing, how is the price elasticity of demand calculated?
The price elasticity of demand is the % change in demand divided by the % change in price.
What is the difference between ‘mark-up’ and ‘margin’?
Mark-up is the gross profit as a percent of cost. Margin is the gross profit as a percent of sales.
In the context of linear programming, what is meant by ‘slack’?
Slack occurs when the optimum solution uses less of a resource than the maximum that is available.
When measuring Value for Money for a not-for-profit organization, what are the three E’s?
- Economy
- Efficiency
- Effectiveness
For theoretical transfer pricing, how is the maximum transfer price calculated?
The maximum transfer price is the lower of:
* the selling price less the marginal costs of the receiving division
* the price for which the receiving division could buy the goods externally
For theoretical transfer pricing, how is the minimum transfer price calculated?
For theoretical transfer pricing, how is the minimum transfer price calculated?
How is the RI (residual income) ?
profit before interest and tax- ( Capital Employed* cost of capital (cost of borrowing))
How is the ROI (return on investment)?
profit before interest and tax/ capital employed
In the context of divisionalisation, what is meant by an ‘investment centre’?
An investment centre is a division for which the divisional manager has control over costs, revenues, and investment in non-current assets and net current assets.
What are the three categories of stakeholders in a business?
Internal (employees, management)
Connected (shareholders, suppliers, customers, lenders)
External (government, community etc..)
What are characteristics of a service business that distinguish services from manufacturing?
Intangibility
Simultaneity / inseparability
Perishability
Heterogenuity
No transfer of ownership
Why is important that non-financial performance is measured rather than concentrating solely on financial performance?
Non-financial performance measures (such as quality) and important for achieving future growth. Financial measures concentrate on the past rather than the future.
What is meant by TQM (total quality management)?
TQM is a strategy aimed as creating an awareness of quality in all aspects of a business, thus reducing wastage and inefficiencies.
What is meant by the JIT (just in time) inventory strategy?
JIT involves keeping minimum inventories – producing goods when they are needed and eliminating large inventories of raw materials and finished goods.
What are operational variances measuring?
comparing the actual results with the revised standard.
What are planning variances measuring?
comparing the revised standards with the original standards.
When considering planning and operational variances, what is meant by the revised standard cost?
The revised standard cost is a realistic standard cost after taking into account permanent changes since the original standard cost was calculated.
What is the purpose of an operating statement?
An operating statement is a statement reconciling the actual profit to the budgeted profit, and explaining the reasons for the difference.