Performance Measures and Management Techniques Flashcards
Balanced Scorecard
a strategic performance measurement system that includes financial and nonfinancial performance measures. The measures are in the four perspectives:
financial
customer
internal business processes
learning and gowth
Cash flow ROI
average real cash return on all existing projects as reflected in the financial statements
Continuous improvement
seeks continual improvement of machinery, materials, labor, and production methods by soliciting suggestions and ideas from employees and customers
Cost of quality
a technique that is based on the philosophy that failures have an underlying cause, prevention is cheaper than failures, and cost of quality performance can be measured
Cross-sectional analysis
involves benchmarking the firm’s ratios against ratios of similar firms at a point in time.
Economic profit
accounting profit minus the cost of capital
economic value added
net operating profit after taxes minus the after-tax weighted-average cost of capital multiplied by total assets minus current liabilities (cost of invested capital)
free cash flow
net operating profit taxes plus depreciation and amortization minus capital expenditures minus the change in working capital requirements
Horizontal analysis
involves an evaluation of the firm’s ratios and trends over time
Kaizen
the Japanese art of continuous improvement
Pareto chart
a bar graph that ranks causes of process variations by the degree of impact on quality
Strategy maps
diagrams of the cause and effect relationships between strategic objectives
Residual income
net income minus a cost of capital based on capital invested in the project or division
Residual income profile
a graphical way to look at the relationship between residual income and return on investment
total quality management
focuses on managing the firm to excel in quality in all dimensions of products and services for customers
