Flashcards in Chapter 5 - Performance Indicators Deck (30)

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1

## What is benchmarks?

### Standards or targets set for one or more areas of activity and should be related to what is important to the organisation.

2

## What does quantitative data mean?

### Data which can be stated in numbers which can be split into financial or monetary data.

3

## Examples of financial quantitative data

###
1) turnover

2) selling prices

3) variances

4) costs

5) costs per unit/hour

4

## Examples of non financial quantitative data?

###
1) production units

2) number of rejects

3) number of complaints

4) number of orders placed

5

## What does qualitative data mean?

### Data which cannot be put in numerical terms. It consists of peoples judgement and opinions which is used for performance measuring.

8

## What is the gross profit margin (%) formula?

### Gross profit / sales X 100%

9

## What is the net profit margin formula?

### Net profit / sales X 100%

10

## What is the operating profit margin formula?

### Operating profit / Sales X 100%

11

## Examples of performance measures?

###
1) sales

2) profit

3) costs

4) cost per employee

5) cost per hour

6) cost per unit of output

12

## Why are performance indicators used?

###
1) to identify a problem

2) to control expenses

3) measuring the performance of an individual

4) to create plans within an organisation

13

## What is ‘return on capital employed’?

### Money being used to finance the running costs of the business which is represented by the owners capital and long term liabilities.

14

## What is the ‘return on capital employed’ formula?

###
Operating profit / (non current assets + net current assets) X 100%

Or

Operating profit / (capital + long term liabilities) X 100%

15

## What is the ‘return on net assets’ formula?

### Operating profit / net assets X 100%

16

## What is value added?

###
The difference between value of output (sales) and value of inputs (materials/bought in services).

Value added = sales - (cost of materials used and bought in services)

17

## What is asset turnover and the formula?

###
The number of times the value of the assets has been obtained in turnover.

Asset turnover = turnover(sales) / (non current assets + net current assets)

18

## What is working capital?

### The part of a business which circulates between inventory, receivables, cash and trade payables.

19

## Current ratio meaning and formula

###
This shows the number of times the current liabilities are covered by the current assets.

Current assets / current liabilities

20

## Quick ratio (acid test) meaning and formula

###
This ratio is used to compare the current assets other than inventory with the current liabilities.

(Current assets - inventory) / current liabilities

21

##
Inventory holding meaning and formula

###
This shows how well the stock is being managed or the length of time taken to sell the inventory

Inventory / cost of goods sold X 365

22

## Inventory turnover meaning and formula?

###
This shows the number of times the inventory is sold in the year.

Cost of sales / inventory

23

## What is gearing and the formula?

###
What proportion of total funding comes from sources that demand regular payments of interest or dividends.

Debt / (debt + equity) X 100

24

## What is gearing (debt to equity) and the formula?

###
Compares the loans or debts directly to he equity instead of capital employed.

Debt / (Share capital + reserves) X 100

25

##
What is the main and individual formulas for control ratios?

(ECA)

###
Activity ratio = capacity X Efficiency

Efficiency = standard hrs for actual production / Actual hours

Capacity = Actual hours / budgeted hours

Activity(Volume) = standard hours for actual production / budgeted hours

26

## Is it better to have low or high working capital cycle and why??

### High - this indicates greater investment in working capital.

27

## What causes the gross profit margin to change??

###
- sales price

- sales volume (depending on whether you’re comparing flexed budgets)

- material prices

- labour costs

28

##
Control ratio formulas ..

Efficiency

Activity

Capacity

###
Eff - S / A = standard hrs/actual hrs

Act - S / B = standard hues/actual hours

Cap - A / B = actual hrs / budget hrs

29

## What is a balanced scoreboard?

### A way of viewing the performance of a profit making organisation from 4 perspectives.

30

## What 4 perspectives are included in the balanced scoreboard?

###
1) financial - satisfying shareholders

2) customers - satisfaction and loyalty

3) internal - technical excellence and needs

4) innovation and learning - continual improvement

31

## Examples of qualitative measures in service organisations

###
• Average waiting time for customers

• customer complains/satisfaction

32