WorksheetsMA -Ch-16 , Performance Measurement
Total questions: 40
Worksheet time: 48mins
All of the following, except one, are sound principles for devising objectives in order to enact the corporate mission. Which is the exception?
They should be observable or measurable
They should be easily achievable
They should relate to a specified time period
They should be specific
In order for a business's strength to have a real benefit, it has to be linked to critical success factors. What are critical success factors?
Factors contributing to reduced costs
Factors necessary to match strengths to opportunities
Factors necessary to build on strengths
Factors fundamental to strategic success
In general terms, which of the following elements should organisations include in their mission statements?
(i) Policies and standards of behaviour
(ii) Values – a description of the culture, assumptions and beliefs regarded as important to those managing the business
(iii) Profitability
(iv) Strategy – the commercial logic for the business, defining the nature of the business
(i) and (ii) only
(ii) and (iv) only
(i), (ii) and (iv) only
(iii) and (iv) only
Which of the following short-term objectives may involve the sacrifice of longer-term objectives?
(i) Reducing training costs
(ii) Increasing quality control
(iii) Increasing capital expenditure projects
(i) only
(i), (ii) and (iii)
(ii) and (iii) only
(i) and (ii) only
What is short-termism?
It is when non-financial performance indicators are used for measurement
It is when organisations sacrifice short term objectives
It is when there is a bias towards short term rather than long term performance
It is when managers' performance is measured on long term results
Market conditions and economic conditions can impact on performance measurement. Which of the following statements are true?
(i) The entry of a new competitor in the market will cause a business to examine sales performance measures more closely
(ii) General economic conditions can raise or lower overall demand and supply
(i) and (ii) are true
(i) and (ii) are false
(i) is true and (ii) is false
(i) is false and (ii) is true
Which of the following BEST explains the relationship between mission statements and performance measurement.
Mission statements are a marketing tool and have no part to play in performance measurement
To be of value, a performance measure must have an obvious link to the mission statement
Performance measurement involves comparing actual performance against a target and the mission statement represents the organisation's overall target
Mission statements include detailed performance standards that actual performance can be measured against
Which of the following describes the role of tactical objectives?
'Middle tier' objectives to facilitate the planning and control of individual functions within the organisation
Day-to-day performance targets related to the organisation's operations
A clear vision of the organisation's reason for existing
Long-term objectives for the organisation as a whole
A company sells new, high quality motor vehicles in many countries around the world. Half way through the company's current financial year, the global economy unexpectedly goes in to recession.
What impact would the unexpected recession have on performance measurement relating to sales and revenue?
The impact of a recession on the sales of new, high quality motor vehicles cannot be predicted
Sales and revenue are likely to decrease in the second half of the year and performance should be measured in that context
No impact as a recession is unlikely to impact the sales and revenue of motor vehicles
Sales and revenue are likely to increase in the second half of the year and performance should be measured in that context
Which of the following describes the role of strategic objectives?
'Middle tier' objectives to facilitate the planning and control of individual functions within the organisation
Day-to-day performance targets related to the organisation's operations
A clear vision of the organisation's reason for existing
Long-term objectives for the organisation as a whole
The following statements relate to benchmarking.
Which TWO statements are true?
1.A danger of benchmarking is that inappropriate comparisons lead to incorrect conclusions
2.Benchmarking must involve competitors to be effective
3.The ultimate aim of benchmarking is to improve performance
4. Benchmarking is essentially a cost cutting exercise
1,4
1,3
1,2
3,4
A financial services company benchmarks the performance of its IT department with that of a leading IT outsource company.
What type of benchmarking is the company using?
Strategic
Competitive
Functional
Internal
Company A manufactures mobile phones. Staff employed within the Research & Development function at Company A have purchased a mobile phone manufactured by Company B for the purpose of reverse engineering.
What type of benchmarking is Company A using?
Strategic
Competitive
Functional
Internal
Which of the following are suitable measures of performance at the strategic level?
(i) Machine idle time
(ii) Employee sick days
(iii) Return on capital employed
(i) and (ii)
(ii) only
(ii) and (iii)
(iii) only
What is 'short-termism'?
A legitimate focus on short-term results
A belief that senior management have a duty to maximise profit
Prioritising short-term results above the organisation's long-term prospects
A management philosophy linked to TQM
Which of the following performance indicators is a financial performance measure?
Quality rating
Number of customer complaints
Cash flow
System (machine) down time
What is the value of the acid test ratio?
0.6875
0.7093
1.2708
2.000
A company has current assets of $1.8m, including inventory of $0.5m, and current liabilities of $1.0m.
What would be the effect on the value of the current and acid test ratios if the company bought more raw material inventory on three months' credit?
Current ratio Acid test
1.increase increase
2. decrease decrease
3. increase decrease
4. decrease increase
2
1
3
4
An investment centre earns a return on investment of 18% and a residual income of $300,000. The cost of capital is 15%. A new project offers a return on capital employed of 17%.
If the new project were adopted, what would happen to the investment centre's return on investment and residual income?
Return on investment Residual income
1. increase decrease
2. increase increase
3. decrease decrease
4.decrease increase
1
2
3
4
An extract from a company's financial results for 20X6 are shown below.
What is the gross profit percentage for 20X6, to one decimal place?
62.9%
63.9%
61.7%
61.6%
What is the main focus of the current ratio?
Profitability
Efficiency
Liquidity
Productivity
What is the main focus of the acid test ratio?
Profitability
Efficiency
Liquidity
Productivity
The following information is available for company X.
Calculate the change in ROI from 20X7 to 20X8?
Decrease from 20% to 15%
Increase from 1.5% to 2%
Increase from 7.5% to 13.3%
Decrease from 100% to 90%
Using the figures in the question above, what is the asset turnover for 20X8, to one decimal place?
7.5 times
6.5 times
5.5 times
7.4 times
Division A of Aigburth Co is considering a project which will increase annual net profit after tax by $30,000 but will require average inventory levels to increase by $200,000. The current target rate of return on investments is 13% and the imputed interest cost of capital is 12%.
Based on the ROI and/or RI criteria would the project be accepted?
ROI – yes, RI – no
ROI – yes RI – yes
ROI – no, RI – yes
ROI – no, RI – no
Which of the following statements are valid criticisms of return on investment (ROI) as a performance measure?
(i) It is misleading if used to compare departments with different levels of risk
(ii) It is misleading if used to compare departments with assets of different ages (iii) Its use may discourage investment in new or replacement assets
(iv) The figures needed are not easily available
(ii) and (iii) only
(ii) and (iv) only
(i) and (iii) only
(i), (ii) and (iii)
A means of raising the production efficiency of an operating unit by the reorganisation of work is known as which of the following?
Work measurement
Work study
Method study
Method measurement
Value analysis can achieve which TWO of the following?
1. Eliminate costs
2. Reduce costs
3.Increase quantity sold
4.Increase sales price
1,2
3,4
1,3
1,4
Value analysis considers four aspects of value. What are they?
Cost value, exchange value, use value and esteem value
Cost value, trade value, use value and esteem value
Cost value, exchange value, use value and retail value
Competitive value, exchange value, use value and esteem value
A division currently earns a return on investment (ROI) of 20%. It is considering investing in a project which has a residual income (RI) of $1,000 at an imputed interest charge of 20%.
What is the effect on the division’s ROI if the project is undertaken?
Increase
Decrease
Remain the same
No possible to tell from this information
A retailer has two divisions, North and South. Both sell similar products and all prices are set centrally. All shop premises are rented. Shop rental costs in the South division are lower than in the North division due to a government subsidy given to landlords
. Which of the following measures would NOT provide a fair comparison of the performance of the management of the two divisions?
Gross profit
Return on capital employed
Turnover per square metre of shop floor space
Asset turnover
A government body uses measures based upon the 'three Es' to the measure value for money generated by a publicly funded hospital. It considers the most important performance measure to be 'cost per successfully treated patient'. Which of the three E's best describes the above measure?
Economy
Effectiveness
Efficiency
Externality
Which of the following statements are true?
(i) Non-financial performance indicators are less likely to be manipulated than financial ones
(ii) Non-financial performance indicators offer a means of counteracting short-termism
(i) and (ii) are true
(i) and (ii) are false
(i) is true and (ii) is false
(i) is false and (ii) is true
Which of the following best describes the advantage of a balanced scorecard approach?
The balanced scorecard approach enables organisations that are struggling financially to emphasise other areas
The balanced scorecard approach enables organisations to consider all areas of performance relevant to achieving their strategic goals
The balanced scorecard approach enables organisations to more easily benchmark their performance against others
The balanced scorecard approach enables organisations to demonstrate their ethical credentials
Why would an organisation use non-financial performance measures?
To appear socially responsible
To prevent a narrow focus on short-term financial performance
To prevent scrutiny of financial performance
To encourage short termism
The balanced scorecard measures performance from four perspectives. What are they?
Customer satisfaction, growth, financial stability and process efficiency
Customer retention, growth, financial stability and process efficiency
Customer satisfaction, growth, financial success and process effectiveness
Customer satisfaction, growth, financial success and process efficiency
In not for profit businesses and state-run entities, a value-for-money audit can be used to measure performance. It covers three key areas: economy, efficiency and effectiveness. Which of the following could be used to describe effectiveness in this context?
Avoiding waste of inputs
Achieving agreed targets
Achieving a given level of profit
Obtaining suitable quality inputs at the lowest price
Balance Co is looking to introduce a balanced scorecard and is finalizing the measures to use for the 'innovation and learning' perspective. Which one of the following is not relevant for this perspective?
Number of ideas from staff
Percentage of sales from new products
Number of new products introduced
Level of refunds given
Qual Co is keen to increase the use they make of non-financial performance measures in their overall performance measurement activities.
In particular, they are keen to improve customer retention and so want to focus on the quality of service they provide to their customers.
Which of the following measures would be most appropriate as a measure of service quality?
(i) Number of customer complaints
(ii) Number of repeat orders as a proportion of total orders
(iii) Sales volume growth
(i) and (ii)
(i), (ii) and (iii)
(i) and (iii)
(ii) and (iii)
Which of the following are non-financial objectives?
(i) Growth of sales
(ii) Diversification
(iii) Contented workforce
(iv) Increase earnings per share
(ii) and (iii)
(i), (ii) and (iii)
(ii), (iii) and (iv)
(i), (iii) and (iv)
