Acca P5 Revision Notes

PERFORMANCE MEASUREMENT (1)

FINANCIAL PERFORMANCE:

GROWTH: Revenue / Profits / EBITDA / Market Share

PROFITABILITY: Absolute profit / ROCE / Profit margin

GEARING: Gearing ratio

LIQUIDITY: Current ratio / Net cash flow

SHAREHOLDERS: EPS / Share price / PE ratio

Always comment on any significant changes (e.g. new issue of shares) and likely reasons/effects

(e.g. new investment - therefore possibly more profit in the future)

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PAPER P5 DECEMBER 2011 REVISION

PERFORMANCE MEASUREMENT (2)

FITZGERALD AND MOON’S BUILDING BLOCKS

Look at performance under six headings:

* FINANCIAL

* QUALITY

* FLEXIBILITY

* EFFICIENCY (resource utilisation)

* INNOVATION

* COMPETITIVENESS

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PAPER P5 DECEMBER 2011 REVISION

PERFORMANCE MEASUREMENT (3)

KAPLAN & NORTON’S BALANCED SCORECARD

The Four Perspectives

The Balanced Scorecard groups performance measures into four general perspectives:

Financial perspective;

Customer perspective;

Internal process perspective;

Innovation and Learning perspective.

According to each perspective of the Balanced Scorecard, a number of key performance indicators can be used

such as:

Financial

Cash flow

Return on Investment

Return on capital employed

Return on equity

Customer

Delivery Performance to Customer - by Date

Delivery Performance to Customer - by Quality

Customer satisfaction rate

Customer retention rate

Internal Business Processes

Number of Activities

Accident Ratios

Equipment Effectiveness

Innovation and Learning

New innovations

Training per employee

Internal Promotions %

Employee Turnover

Under each perspective we should have a Goal; a Measure; and a Statistic

E.g. under the Financial Perspective, a Goal may be ‘survival’; a relevant Measure for this Goal may be ‘net cash flow’;

and the Statistic would be an actual figure for the net...