2.5 Performance Measurement

• What does performance measurement in corporate and management accounting involve?

  Evaluating company's performance
• Performance measurement guides decision-making
• Performance measurement facilitates planning and budgeting.
• Which of the following is an example of a financial metric?

  Profit margins
• Company X uses KPIs such as revenue growth and customer satisfaction scores to measure its business performance
• Steps in using KPIs to track performance

  1️⃣ Identify strategic goals

  2️⃣ Define relevant KPIs

  3️⃣ Collect data

  4️⃣ Analyze results

  5️⃣ Take corrective actions
• KPIs align organizational activities with strategic objectives.
• What does the Customer Satisfaction Score (CSAT) measure?

  Customer satisfaction
• Financial performance metrics evaluate the financial health and profitability
• What is the formula for Profit Margin?

  $\frac{\text{Net Profit}}{\text{Revenue}} \times 100$
• Return on Assets (ROA) measures the efficiency of asset utilization to generate profit.
• What does the Employee Retention Rate measure?

  Employee loyalty
• Production efficiency is calculated by dividing total units produced by total labor hours
• Tracking non-financial metrics like production efficiency can help identify bottlenecks in operations.
• What is the formula for production efficiency?

  $\frac{\text{Total Units Produced}}{\text{Total Labor Hours}}$
• The employee retention rate measures the percentage of employees remaining with the company over a year
• Market share is calculated as the ratio of company sales to total market sales multiplied by 100.
• What are non-financial performance metrics used to evaluate?

  Company operations
• Non-financial metrics enhance strategic planning
• Order the categories of non-financial metrics by their primary focus.

  1️⃣ Customer

  2️⃣ Operational

  3️⃣ Employee

  4️⃣ Market
• What is the formula for the Customer Satisfaction Score (CSAT)?

  $\frac{\text{Total Scores}}{\text{Number of Customers}}$
• Performance measurement in corporate accounting involves evaluating against established objectives.
• What are two examples of financial metrics used in performance measurement?

  Revenue, profit margins
• Match the financial metric with its definition:

  Revenue ↔️ Income generated from sales

  Profit margin ↔️ Percentage of revenue after expenses

  Return on assets ↔️ Efficiency of asset utilization

  Earnings per share ↔️ Profit attributable to each share
• What are KPIs used for in corporate accounting?

  Tracking performance
• KPIs facilitate data-driven decision-making.
• Employee retention rate is a KPI used to measure human resources performance.
• What do financial performance metrics primarily evaluate?

  Financial health and profitability
• The revenue growth rate measures the percentage increase in revenue from one period to the next.
• Match the financial metric with its formula:

  Revenue Growth Rate ↔️ $\frac{\text{Current Year Revenue} - \text{Previous Year Revenue}}{\text{Previous Year Revenue}} \times 100$

  Profit Margin ↔️ $\frac{\text{Net Profit}}{\text{Revenue}} \times 100$

  Return on Assets ↔️ $\frac{\text{Net Profit}}{\text{Total Assets}} \times 100$

  Earnings per Share ↔️ $\frac{\text{Net Profit} - \text{Preferred Dividends}}{\text{Weighted Average Shares Outstanding}}$
• What does the Customer Satisfaction Score (CSAT) measure?

  Customer satisfaction
• The formula for CSAT is $\frac{\text{Total Scores}}{\text{Number of Customers}}$ and the numerator is scores.
• The formula for calculating the employee retention rate is $\frac{\text{Number of Employees at End}}{\text{Number of Employees at Start}} \times 100$
• Non-financial performance metrics are reflected directly in financial statements.

  False
• What is one reason why non-financial metrics are important?

  Enhance strategic planning
• One key category of non-financial metrics is operational
• The Customer Satisfaction Score (CSAT) is calculated by dividing the total scores by the number of customers.
• What does production efficiency measure?

  Units produced per labor hour
• The employee retention rate is expressed as a percentage
• Order the following methods of performance measurement based on their primary focus:

  1️⃣ Return on Investment (ROI): Financial performance

  2️⃣ Balanced Scorecard (BSC): Holistic view

  3️⃣ Economic Value Added (EVA): Profit above capital cost

  4️⃣ Triple Bottom Line (TBL): Economic, environmental, social impacts