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BEC 45
Performance Measures and Management Techniques
| Term | Definition |
|---|---|
| Balanced scorecard | four perspectives of performance measures: 1) financial 2) customer 3) internal business processes 4) learning and growth |
| Components of the balance scorecard | 1) strategic objectives (what) 2) performance measures (how measured?) 3) baseline performance (how measured?) 4) targets (how measured?) 5) strategic initiatives (how) |
| Value chain | the sequence of processes in which usefulness is added: innovation process, operations process, and post- sales process |
| Value based management (VBM) | the use of performance measures in a strategic mgmt. system; financial scorecard |
| Return on investment | return/investment; usually is computed using net income after interest and taxes |
| DuPont ROI analysis | looks at ROI as driven by return on sales (net income/sales) and asset turnover (sales/ total assets); improve profits by: increasing net income per dollar of sales OR using assets to generate more sales |
| Residual income | net income (operating income after taxes) – cost of capital invested |
| Economic profit | accounting profit – cost of capital |
| Economic value added (EVA) | NOPAT – after tax WACC (total assets- total liabilities) |
| Free cash flow | NOPAT + Depreciation and amortization- capital expenditures – the change in working capital requirements |
| Gross profit | net sales- COGS |
| Gross margin | gross profit/ net sales |
| Operating profit margin | net income after interest and taxes/ net sales |
| Return on assets | NI after Interests and taxes/ average total sales |
| Return on equity | NI after interests and taxes/ average common stockholders’ equity |
| Dividend payout ratio | cash dividend per share/ earnings per common share |
| Receivables turnover | net credit sales/ avg AR |
| Average collection period OR number of days sales in receivables | avg AR/ avg sales per day |
| Inventory turnover | COGS/average inventory |
| Number of days sales in inventory | avg inventory/ (COGS/365) |
| Fixed asset turnover | sales/ avg. net fixed assets |
| Total asset turnover | sales/ avg total assets |
| Current ration | current assets/ current liabilities |
| Quick ( acid test) ration | current assets- inventory/ current liabilities |
| Debt to total assets | total liabilities/ total assets |
| Debt to equity ratio | total liabilities/ total equity |
| Times interest earned | EBIT/ interest expense |
| Price/ earnings ratio ( P/E) | stock price per share/ Earnings per share |
| Market/book ratio | book value per share = common stock equity/ |
| Horizontal analysis | evaluation of a firm’s ratios and trends over time: |
| Cross sectional analysis | benchmarking the ratios against ratios of similar firms at a point in time |
| Vertical analysis | development of common size financial statements; I/S: all revenues and expenses are presented as a percentage of net sales; B/S all assets, liabilities, and SHE presented as a percentage of total assets |
| Total Quality Management ( TQM) | managing the organization to excel in quality in all dimension s of products and services for customers. |
| Six- Sigma | a statistical measure expressing how close a product comes to its quality goal. One- sigma = 68 percent of the products are acceptable. Six- sigma = 99.999999997 perfect; 3.4 defects per million parts |
| Quality award programs | 1) Malcolm Baldrige National Quality Award 2) Deming Prize,3 ) European Quality Award |
| TQC | Total quality control |
| Continuous Improvement ( CI)/ Kaizen | Kaizen Japanese are of continuous improvement |
| PDCA ( Plan- Do-Check- Act) | aka Deming Wheel |
| Cause and effect diagrams ( fishbone or Ishikawa) diagrams | identifies the causes of a defect; 1) human factors 2) methods and design factors 3) machine related factors 4 ) material and components factors |
| Pareto chart | a bar graph that ranks causes of process variations by the degree of impact on quality; 80 percent of the problem comes from 20 percent of the causes |
| Poka- yoke | making the workplace mistake proof |
| Cost of quality | 1) prevention cost 2) appraisal cost 3) internal failure cost 4) external failure cost |
| Project management | manage resources, time, money, scope |
| Project management processes | 1)initiation 2) planning 3) execution 4) monitoring 5) control 6) closure |
Created by:
tsp7c
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