Business Performance Measurement Systems Quiz
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Questions and Answers

What percentage of the overall grade does the final exam contribute?

  • 75% (correct)
  • 50%
  • 100%
  • 25%

The purpose of performance measurement systems (PMS) is solely to convey financial information.

False (B)

Name one objective that PMS can assist managers with.

Communicating to the organization the strategic goals.

Netflix's library is considered an __________ asset in the entertainment industry.

<p>intangible</p> Signup and view all the answers

Match the following business goals with their descriptions:

<p>Economic and financial goals = Focus on profitability and revenue growth Market share goals = Aim to increase a company’s control within the market Capabilities for learning and innovation = Encourage ongoing development and adaptation Short-term profit goals = Focus on immediate financial performance</p> Signup and view all the answers

Which of the following balances does a PMS help to manage?

<p>Balancing short-term results against long-term capabilities (B)</p> Signup and view all the answers

Current assets include cash, inventory, and receivables.

<p>True (A)</p> Signup and view all the answers

How does Netflix's decision to produce its own content impact its asset value?

<p>It increases the value of its intangible asset, the library.</p> Signup and view all the answers

What was one of the goals of the 1993 Mission Statement?

<p>Produce high-quality opera productions (C)</p> Signup and view all the answers

The Balanced Scorecard was introduced in 1999 to improve operational efficiency.

<p>False (B)</p> Signup and view all the answers

What is one of the challenges faced in implementing the Balanced Scorecard?

<p>Resource-intensive requirements</p> Signup and view all the answers

The process can be described using the _____ model, which includes input, transformation, and output.

<p>IPO</p> Signup and view all the answers

Match the following mission statement updates to their respective years:

<p>1993 Mission Statement = Produce high-quality opera productions 1999 Mission Update = Build a knowledgeable opera community Balanced Scorecard Introduction = Align strategy and set objectives</p> Signup and view all the answers

What did ticket sales cover according to the stated figure?

<p>Less than 40% of operating expenses (C)</p> Signup and view all the answers

The Balanced Scorecard enhanced transparency of goals and focused on resource allocation.

<p>True (A)</p> Signup and view all the answers

What are two themes focused on in the Balanced Scorecard?

<p>Donor loyalty and artistic reputation</p> Signup and view all the answers

What is the expected accommodation revenue?

<p>$4,321,600 (D)</p> Signup and view all the answers

COGS for F&B is 58%.

<p>True (A)</p> Signup and view all the answers

What percentage of total revenues do Energy Costs represent?

<p>3%</p> Signup and view all the answers

The NPV calculated for the investment is $______.

<p>9,489,892</p> Signup and view all the answers

Match the following expenses with their respective percentages of total revenues:

<p>Insurance = 1% Energy Cost = 3% G&amp;A expenses = 7% Marketing cost = 4%</p> Signup and view all the answers

The initial budget for the creative aspects of the movie was higher than the adjusted budget.

<p>True (A)</p> Signup and view all the answers

What was the total initial budget compared to the revised budget for the movie?

<p>Initial: $217,900; Revised: $218,000</p> Signup and view all the answers

What was one of the immediate business priorities for Tiger Airways in 2012?

<p>Improve safety and risk management systems (A)</p> Signup and view all the answers

Tiger Airways aimed to achieve a profitability turnaround by reversing a US$80M loss.

<p>True (A)</p> Signup and view all the answers

Name one challenge faced by Tiger Airways after its IPO.

<p>Executive departures</p> Signup and view all the answers

Tiger Airways needed to stabilize operations and rebuild its brand's ___ in 2012.

<p>reputation</p> Signup and view all the answers

Match the following compensation scheme elements to their descriptions:

<p>Fixed Pay = Attract talent by benchmarking to market rates Short-Term Incentives = Linked to immediate crisis management goals Long-Term Incentives = Align executives with sustainable growth Benefits = Adjusted based on employee level</p> Signup and view all the answers

What was a key operational metric for Tiger Airways?

<p>Fleet utilization and cost efficiency (D)</p> Signup and view all the answers

Employee performance metrics were irrelevant to the financial performance of Tiger Airways.

<p>False (B)</p> Signup and view all the answers

What did Tiger Airways focus on aligning with corporate objectives?

<p>Employee incentives</p> Signup and view all the answers

What was the revenue of Electa Publishing House in 2019?

<p>41.7 million euros (C)</p> Signup and view all the answers

Electa Publishing House has been established since 1950.

<p>False (B)</p> Signup and view all the answers

Name one area of activity for Electa Publishing House.

<p>Publishing, Exhibitions, Bookshops and merchandising, Communications, Sponsorships, events and special projects.</p> Signup and view all the answers

Electa Publishing House is known for its contribution to ___ culture.

<p>figurative</p> Signup and view all the answers

Match the following acquisitions with their respective years:

<p>Rizzoli Italia illustrati = 2016 Rizzoli International Publications = 2016 Abscondita = 2020</p> Signup and view all the answers

What is a primary purpose of performance goals?

<p>For planning and coordination (C)</p> Signup and view all the answers

Relative performance targets make it easier to manipulate results.

<p>False (B)</p> Signup and view all the answers

What are the three major design decisions for contingent incentives?

<p>The bonus pool, the allocation formula, the type and mix of incentives.</p> Signup and view all the answers

The allocation formula for performance is typically based on individual performance, business performance, and __________ performance.

<p>corporate</p> Signup and view all the answers

Match the performance categories with their typical weight percentages:

<p>Individual performance = 10% Business performance = 20% Corporate performance = 50%</p> Signup and view all the answers

What type of target is suggested as being harder to manipulate?

<p>Revenue-based targets (B)</p> Signup and view all the answers

Increasing payouts at a constant rate is an effective strategy for adjusting performance incentives for risk.

<p>True (A)</p> Signup and view all the answers

Name one intrinsic motivation factor that can enhance employee commitment.

<p>Interesting work or Involvement.</p> Signup and view all the answers

Flashcards

Performance Measurement System (PMS)

A formal system that uses financial information to influence decision-making and managerial actions, impacting organizational activities.

Business Goals

The measurable aspirations set by managers for a business, encompassing economic, financial, market share, and innovation goals.

Business Strategies

The strategies a company uses to create value for customers and stand out from competitors. It outlines the business model and organizational approach to competing.

Current Assets

The assets that are directly involved in generating revenue for the business, including cash, inventory, and receivables.

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Fixed Assets

The assets that are long-lasting and used for more than one year, including tangible assets like machinery and intangible assets like patents.

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Netflix Library Valuation

The process of evaluating the performance of a company based on the value of its library, which represents ownership or rights to intellectual property, like content or technology.

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Intangible Asset: Library

A long-term asset that represents the collection of intellectual property rights, such as content, patents, or copyrights, crucial for the entertainment industry.

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Days Sales Outstanding (DSO)

A metric used to assess the effectiveness of a company's sales and collection processes, indicating the average number of days it takes to collect payment from customers.

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Accommodation revenue

Revenue from guests staying in rooms.

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F&B revenue

Revenue generated from food and beverage services.

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Spa revenue

Revenue generated from spa services.

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COGS (Cost of Goods Sold)

Expenses directly related to the cost of goods sold, including raw materials, labor, and packaging.

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Gross Margin

The difference between revenue and the cost of goods sold, representing the profit generated from the sale of goods.

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Franchising royalty

A fee paid by a franchisee to the franchisor for the right to use the franchisor's brand, systems, and trademarks.

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Operating expenses

Costs associated with operating a business, including salaries, rent, utilities, and insurance.

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Depreciation

A non-cash expense that reflects the decline in value of an asset over time, such as buildings or equipment.

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Process Measures

Measures that assess the efficiency and effectiveness of processes within an organization.

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Output Measures

Measures that focus on outputs, quantifying the value produced by an organization.

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Outcome Measures

Measures that help assess the achievement of long-term goals and the overall performance of an organization.

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Balanced Scorecard

A framework that aligns an organization's strategic objectives with its operational measures.

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Strategy-Organization-Measures

The strategy of an organization dictates its structure, processes, and ultimately the measures used to assess performance.

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Input Measures

The ability to measure the input resources used in a process, such as information, materials, or energy.

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Transformation Measures

The process of transforming input resources into valuable output products or services.

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Coherence of Measures with Responsibilities

Measures that assess the coherence between performance measures and the responsibilities assigned to individuals or teams.

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Turnaround Phase

A business strategy that aims to improve performance and regain profitability after a period of decline or challenges.

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Stabilize Operations

The process of making a company's performance stable and regaining customer trust.

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Key Performance Indicators (KPIs)

Metrics used to track key aspects of a company's performance.

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Financial Metrics

The financial health of a company, considering revenue and profitability.

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Operational Metrics

Measures related to a company's operational efficiency and effectiveness.

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Employee Engagement and Retention

The ability to attract and retain skilled employees who are motivated to contribute to a company's success.

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Compensation as a Performance Tool

Compensation strategies designed to align employee incentives with company goals and objectives.

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Short-Term Incentives

A type of incentive linked to achieving immediate goals, often focused on addressing crisis situations.

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What are KPIs?

Key Performance Indicators (KPIs) are measurable values that demonstrate how effectively a company is achieving its business objectives. They help track progress, identify areas for improvement, and make data-driven decisions.

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What is 'Monthly sales and variations' a KPI for?

Monthly sales measure the total revenue generated from product or service sales within a specific month. Variations in monthly sales can be tracked to understand growth trends, seasonal patterns, or the impact of marketing campaigns.

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What is CRM?

Customer Relationship Management (CRM) is a system for managing interactions with customers. It can be used to track leads, analyze customer behavior, and optimize the customer experience.

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What is 'Cohort analysis - Time Life Value' used for?

Cohort analysis is a way to study how different groups of customers behave over time. It's useful for understanding how customer value changes over their lifetime with a company.

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What does the 'Acquisition cost' KPI measure?

Acquisition cost is the amount of money spent to acquire a new customer. It can be calculated by dividing the total cost of marketing and advertising by the number of new customers gained.

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Planning and coordination goals

Performance goals set at levels that represent management's best judgment and most likely output levels. They guide planning and coordination within the organization.

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Early warning goals

Performance goals used to identify potential problems early by comparing actual performance to established goals. They provide early warning signals.

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Ex post evaluation goals

Performance goals that are used to evaluate managerial performance after a period. They determine the extent to which goals were met, exceeded, or missed.

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Revenue-based goals

Performance goals based on revenue targets, which are less susceptible to manipulation compared to profit targets.

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Constant rate payouts

Incentives where payouts increase at a consistent rate, adjusted for risk, making them less prone to manipulation.

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Relative performance incentives

Incentives that measure performance relative to competitors, making it harder to manipulate as competitor data is not readily available.

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Non-financial incentives

Incentives that include non-financial factors, providing leading indicators of the long-term viability of an organization's strategy.

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Incentive system

A payment structure where individuals earn higher pay when their performance exceeds a predetermined base or threshold, fostering improved performance and motivation.

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Study Notes

Performance Management

  • Assignment grade: simple average of 2 assignments (25%)
  • Final written exam: 75% essay questions relating to class theory and case studies.
  • Exam duration: 90 minutes
  • Exam format: exercises and open questions

PMS (Performance Measurement Systems)

  • PMS components: convey financial information, and influence managerial action
  • Used by managers to influence decision-making

Business Strategies

  • Defined as how a company creates value, differentiates itself, and competes in the marketplace.
  • Measurable business goals: economic, financial, market share, capabilities

Design and Use of PMS to Support Strategy

  • Balancing profit, growth, and control
  • Balancing short-term results with long-term capabilities and growth
  • Balancing performance expectations of different stakeholders
  • Balancing opportunities and attention
  • Balancing human behavior motivations

Growth in Sales

  • Increase in assets
  • Sales example: 12,000
  • Days of Sales Outstanding (DSO): 90 days
  • Receivables: 3,000
  • Sales example 2: 18,000 (1500 x 12)
  • DSO: 90 days
  • Receivables: 4,500 (50% increase)

Current Assets

  • Cash, inventory, and receivables

Fixed Assets

  • Tangible: equipment, machinery, buildings
  • Intangible: patents, rights, financial assets

Liabilities vs. Equity

  • Balancing profit, growth, and control

Performance Management Drivers/Measures

  • Double-digit sales growth
  • Extension of brands into new product categories
  • Increase sales in new markets
  • Maintaining #1 market share
  • Measures: number of sales, number of consumers, market share, profitability, cosmetic consumption, sales (items/value) in new markets

Netflix Case

  • Library of a company is the most relevant asset.
  • The value of a company is evaluated by its library.
  • High investment needed to create its own library.
  • The value of a company is evaluated by its Library.
  • Products become obsolete.
  • Purchase of shares to avoid hostile takeover

Balancing Opportunities & Attention

  • Focused on critical measurement to focus time and attention on opportunities
  • New products, new services
  • New markets
  • Striking alliances
  • Branching into other industries

Balancing Human Behavior

  • Needs that have been satisfied are no longer motivating
  • Maslow's hierarchy of needs
  • Organizational blocks of people

Corporate vs. Business Strategy

  • Different levels of investment decisions to build up the ability to counter competitors

Analyzing Industry Attractiveness

  • Market size
  • Expected market growth rate
  • Number of significant competitors
  • Concentration of competitors
  • Profitability of the entire sector
  • Barriers to entry into the sector

Key Strategic Options

  1. Focus on Agricultural Production (no investment) ○ Selling grapes at a fixed price. ○ Minimal operational changes.
  2. Outsource Wine Production & Build Brand ○ Brand building investment. ○ Produce 700,000 bottles annually ○ Costs: €1.5/bottle.
  3. Build a Limited Capacity Wine Processing Plant ○ Investment for plant and branding ○ Produce 200,000 bottles in-house; outsource the rest. ○ Revenue streams: modern trade and specialty shops.
  4. High-End Winery with Tourism & Events ○ Investment for architectural plant with advanced technology ○ Production of 700,000 bottles ○ Focus on wine tourism and B2C sales.

Financial Metrics

  • Return on Assets (ROA)
  • Return on Equity (ROE)
  • Profitability
  • Examples: Option D has the highest revenue potential, but substantial investment.

Balanced Scorecard Perspectives

  • Financial, customer, internal process, and learning & growth.
  • Specifics of each aspect

Performance Measurement in Financial Statements

  • Formal routines for organizations to communicate financial/economic results.
  • Used by investors and lenders.

Typical Income Statement Items

  • Revenue
  • Expenses
  • Raw materials used
  • Wages expense
  • Rent expense
  • Interest expense
  • Advertisement expense
  • Insurance expense
  • Repair expense
  • Income tax expense
  • Loss on disposal

Income Statement Items - Organization

  • Operating activities (day-to-day business)
  • Non-recurring activities (unusual activities)
  • Write-downs of inventories or PP&E
  • Reversals of write-downs
  • Restructuring costs
  • Disposals of PP&E or investments
  • Litigation settlements

Income Statement Items

  • Net operating sales (cost of goods sold), gross profit
  • Other operating revenues (SG&A expenses)
  • Operating income
  • Non-recurring revenues (non-recurring expenses), EBITDA
  • EBITDA - amortization and depreciation = EBIT
  • Interest and financial income - financial charges = EBT
  • EBT - Taxes = Net Income (from continuing operations)
  • Cost of Goods Sold (COGS) - total value of goods sold

Balance Sheet

  • Assets (investments)
  • Liabilities and Equity (funding sources)
  • Total Assets = Total Liabilities + Total Equity

Ratio Analysis

  • Profitability
  • Solvency
  • Liquidity

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Description

Test your understanding of performance measurement systems, their objectives, and key concepts related to business and finance. This quiz covers topics like the Balanced Scorecard, asset management, and the impact of strategic decisions in organizations. Perfect for students and professionals looking to enhance their business acumen.

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