An in-depth look at accounting ratios, which are vital tools in financial statement analysis to assess a company's performance and position.
An activity ratio is a key metric in management accounting that compares the actual production achieved during an accounting period with the production level deemed achievable for that period. It provides insights into the efficiency and productivity of an organization.
The Balanced Scorecard (BSC) is a strategic planning and management system used by organizations to align business activities with the vision and strategy of the organization. It enhances internal and external communications and monitors organizational performance against strategic goals.
Behavioral accounting is an approach that incorporates psychological and social factors alongside traditional technical aspects in accounting. This multifaceted perspective is essential for understanding the operation of various accounting mechanisms, such as budgetary control systems.
Understanding the financial and physical capital maintenance concepts helps ensure that a company's capital is preserved, facilitating accurate performance measurement over time.
Customer perspective in a balanced scorecard focuses on the target customers and market segments that an organization aims to serve. It measures how well the company performs from the viewpoint of customers.
Divisional performance measurement is a structured approach that allows the central management of an organization to assess the performance of its individual divisions. This is essential in a divisionalized structure to ensure each division is contributing effectively to the organization's overall goals. Common methods include Return on Capital Employed (ROCE), Residual Income (RI), and the profit-to-sales ratio.
Enterprise Performance Management (EPM) refers to the process-based framework and software modules that help businesses manage and improve performance through analysis, planning, monitoring, and control mechanisms. Specifically, EPM encompasses budgeting, forecasting, financial reporting, and scorecarding techniques.
Failure refers to the lack of success in achieving a desired outcome or the inability of a system or component to perform its expected function.
Financial planning involves the formulation of short-term and long-term plans in financial terms to establish goals for an organization to achieve, against which its actual performance can be measured.
A ratio that measures an organization's activity over a period by calculating the number of times the sales are a multiple of the balance-sheet value of the fixed assets.
Industrial Psychology, also known as Personnel Psychology, is a specialized field of psychology focusing on the understanding and application of psychological principles and methods to various aspects of work environments.
Specific measures of the performance of an individual, team, or department in defined key performance areas (KPAs).
The Learning and Growth Perspective of the Balanced Scorecard focuses on the intangible assets like human capital, information capital, and organizational capital that drive continuous improvement and growth in an organization’s strategy.
Management accounting involves techniques used to collect, process, and present financial and quantitative data within an organization to aid in performance measurement, cost control, planning, pricing, and decision making. The Chartered Institute of Management Accountants (CIMA) is the major professional body for management accountants in the UK.
An operating statement is a financial report provided to management, detailing the performance of specific areas of operation over a selected budget period. It includes production levels, costs incurred, and revenues generated, and is compared with budgeted amounts and previous performances.
A detailed analysis of operational variance within the framework of standard costing, highlighting how it accounts for the difference between adjusted current standards and actual performance.
Participative budgeting is a budgeting process where various levels of management are involved in setting the budget. This method aims to boost ownership and accountability, ensuring that performance benchmarks reflect the input of those who are responsible for meeting them.
Performance measurement involves developing indicators to assess progress towards predefined goals and reviewing performance against these measures. It can be applied to an entire organization or specific departments, branches, or individuals, utilizing both financial and non-financial measures.
Residual income is the net income generated by a subsidiary or division after accounting for the costs associated with the capital it uses. This metric is particularly useful in determining the profitability and efficiency of investment projects within larger organizations.
In standard costing, a revision variance, also known as a planning variance, measures the expected difference arising from the original standard and the modified standard due to changed circumstances. These variances help in understanding how accurately performance predictions align with actual outcomes.
RAROC is a performance measurement tool used by financial institutions to determine the risk-adjusted profitability of various units within the organization.
A standard is an established and fixed measure or norm used in assessing quality or performance. Standards ensure consistency, reliability, and quality across various domains, such as products, processes, or services.
An examination or evaluation used to measure a particular achievement, performance, or understanding.
Tracking refers to the process of monitoring and recording the progress or performance of various activities, objects, or data points over time. This can be applied in numerous fields such as logistics, financial performance, project management, marketing campaigns, and online user behavior.
Uncontrollable costs are expenses that cannot be directly managed or influenced by a specific level of management within an organization. These costs are important for accurate performance measurement and often lead to differing opinions on their classification.
