Day: February 19, 2021

DISADVANTAGES OF FINANCIAL PERFORMANCE INDICATORS Concentration on financial indicators means that important goals and factors may be ignored. Concentration on too few variables If performance measurement systems focus entirely on those items which can be expressed in monetary terms, managers Read More …

THE PRIVATE SECTOR: SHAREHOLDER BENEFITS The overriding purpose of a business is to increase long-term owner wealth. Carefully read the case study below.   Case Study The statement of prospects below is adapted from the published accounts of a UK Read More …

THE BALANCED SCORECARD The balanced scorecard approach to performance measurement focuses on four different perspectives and uses financial and non-financial indicators. Knowledge brought forward from earlier studies The balanced scorecard approach emphasises the need to provide management with a set Read More …

EXAM GUIDE The use of decision-making techniques to enhance performance is a core area of the syllabus. This chapter explains three models that could well be tested as a part of a longer question. You could also be asked to Read More …

MISSION STATEMENTS AND VISION Vision is oriented towards the future, to give a sense of direction to the organisation. Mission describes an organisation’s basic purpose, what it is trying to accomplish. Underlying the behaviour and management processes of most organisations Read More …

VALUE-BASED MANAGEMENT APPROACHES The following explanation of value-based management is based on an article in the McKinsey quarterly 1994, adapted from a book Valuation: Measuring and Managing the Value of Companies, Second edition by Tom Copeland, Tim Koller and Jack Read More …

DIVISIONAL STRUCTURE AND PERFORMANCE MEASURES In this section we look at three performance measures relevant in a divisionalised structure. These are Return on Investment, Residual Income and Economic Value Added . Return on Investment (ROI) and Residual Income (RI) were Read More …

PLANNING AND OPERATIONAL VARIANCES        A planning and operational approach to variance analysis divides the total variance into those variances which have arisen because of inaccurate planning or faulty standards (planning variances) and those variances which have been caused Read More …

BASIC VARIANCES Knowledge brought forward from earlier studies A variance is the difference between an actual result and an expected result. Variance analysis is the process by which the total difference between standard and actual results is analysed. When actual Read More …

THE USE OF STANDARD COSTS A standard cost is an estimated unit cost built up of standards for each cost element (standard resource price and standard resource usage). Standard costing is principally used to value inventories and cost production and Read More …