Chapter 1: Strategic Management - VOCABULARY Flashcards

Vocabulary flashcards covering key concepts from Chapter 1: value creation, value chain, AMPS analytics model, data/value concepts, and differences between management and financial accounting.

Business value

The items, events, and interactions that determine a company’s financial health and well-being.

Value creation

Creating value by designing, manufacturing, selling, or trading products and services to customers at a price greater than the cost of creating and distributing those products and services.

Profit formula

Make money: Price > Cost.

Value chain

A chain of primary and support activities that create value for the company and its customers.

Primary activities

Activities that directly create value for the company and its customers.

Inbound logistics

Receiving and storing raw and partially completed materials, and distributing those materials to manufacturing divisions.

Operations

Transform inputs into finished goods and services.

Outbound logistics

Warehouse and distribute the finished goods to customers.

Marketing and Sales

Identify the needs and wants of customers to attract them to buy the company's products.

Service

Provide support to customers after purchase.

Secondary activities

The four activities that sustain primary activities: Procurement, Information Technology (IT), Human Resource Management, Infrastructure.

Procurement

Purchasing inputs such as raw materials, supplies, and equipment.

Information Technology (IT)

Technologies to support value-creating activities.

Human Resource Management

Recruiting, hiring, training, and compensating employees.

Infrastructure

Activities needed to support primary activities (e.g., CEO, finance, accounting, and legal departments).

Information Value Chain

The sequence from data to decisions: Data, Context, Information, Knowledge, Decisions.

Data

Raw facts that describe an event and have little meaning on their own.

Context

The setting surrounding the data—the event, statement, or situation in which the data can be understood and evaluated.

Information

Data organized in a way that is useful to the user in a given context.

Knowledge

An understanding of or familiarity with information gained through learning.

Decisions

Conclusions reached after consideration of knowledge gained.

AMPS data analytics model

A four-step framework for addressing management accounting questions: Ask the Question; Master the Data; Perform the Analysis; Share the Story.

Descriptive analytics

Characterizes, summarizes, and organizes features of the data; answers what happened and what is happening.

Diagnostic analytics

Investigates underlying causes; explains why actual performance differed from expectations.

Role of management accountants

Serves as expert interpreter between the decision maker and the data scientist.

Differences between management and financial accounting

Management accounting provides discretionary internal information (not GAAP) for internal users; financial accounting provides mandatory GAAP-based information for external users.

Ethics in data analysis

Integrity and adherence to a strict code of ethics in data analysis and decision making.

Cost drivers

Factors that cause overhead costs and are used to allocate indirect costs.

Break-even

The sales level at which total revenues equal total costs, resulting in zero profit.