TF MA CH 23

Many common performance measures, such as customer satisfaction, rely on internal financial accounting information

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Some companies present financial and nonfinancial performance measures for various organization units in a single report called the balanced scorecard.

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The balanced scorecard in most organizations is broken down into the following categories: commercial perspective,suppli er perspective,externalbusi ness-process perspecti ve, and productivity perspecti ve

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The first step in designing accounting based performance measures is to choose a target level of performance and feedback mechanism.

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A major weakness of comparing two companies using only operating incomes as the basis of comparison is that it ignores the differences in the size of the investment and therefore any concept of yield or return on investment.

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Reducing the investment base to improve ROI involves decreasing idle cash,paying down debt, determining proper inventory levels,and spending carefull y on long-term asset

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Return on sales can provide how effectively costs are managed and is part of the DuPont method of profitability analysis.

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Return on investment can be calculated by multiplying return on assets by investment turnover

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All other things held constant,increase i n assets such as receivables or decrease in operating income results in an increase in return on investment

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The DuPont method recognizes the two basic ingredients in profit making: increasing the income per dollar of revenues and using assets to generate more revenues

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