SBA-M11

Financial Structure

it refers to the precise mix of debt and equity that fuels your organization.

Capital Structure

It combines instruments like shares (both equity and preference)

False: Financial Structure

Capital Structure is a combination of different types of long-term as well as short-term sources of funds. T/F

True

Financial structure includes all the items in the liabilities section of the balance sheet. T/F

True

Capital structure is a part of the liabilities section of the balance sheet. T/F

False: Financial

Capital Structure

Equity Capital

it is what company owes to their shareholders and owners

Contributed Capital

It is the money that both owners and shareholders have invested in the company

Retained Earnings

These are the part of company's profits that is kept aside for reinvesting in the business/

Debt Capital

it is the money borrowed by the organization from individuals and institutions

periodically

Long-term bonds that have extended repayment terms and the borrowers have to pay interest on them .

time of maturity

the principal amount is payable at the -

Performance Measures

provides direction for managers of decentralized units and are used to evaluate their performance.

Goal Congruence

it means that the goal of the manager are closely aligned with the goals of the firm

Return on Investment (ROI)

It is the most common measure of performance for an investment center.

TRUE

ROI is useful both externally and inernally. (T/F)

Return on Investment (ROI)

A key measure of performance relates the income earned to the investment needed to produce that income.

Operating Income

it refers to earnings before interest and income taxes and is typically used for divisions.

Operating Assets

include all assets used to generate operating income (usually cash

Margin

it is the ratio of operating income to sales

Turnover

Sales / Average Operating Assets.

Turnover

result shows how productively assets are being used to generate sales.

Residual Income

it is measured in dollar amounts rather than percentages. Related the income earned to the minimum required return on investment

Economic Value added (EVA)

After-tax operating income minus the total annual cost of capital

creating wealth

If EVA is positive

destroying wealth

If EVA is negative

True

EVA is a dollar figure

Responsibility Accounting

A system that measures the results of each responsibility center and compares those results with expected or budgeted outcomes

Responsibility center

A part of the business whose manager is accountable for specified activities.

Cost Center

A responsibility center in which a manager is responsibility only for COSTS

Revenue Center

A responsibility center in which a manager is responsible only for REVENUES

Profit Center

A responsibility center in which a manager is responsible for both cost and revenue

Investment Center

A responsibility center in which a manager is responsible for revenues

Centralized Decision Making

decisions are made at the very top level

Decentralized Decision Making

allows managers at lower levels to make and implement key decisions pertaining to their areas of responsibility

Decentralization

The practice of delegating decision-making authority to the lower level.

Efficiency

It is how well activities and perform

Effectiveness

it is defined as whether the manager has performed the right activities.

Balanced Scorecard

It refers to the strategic management performance metric used to identify and improve various internal business functions and their resulting external outcomes

David Norton & Robert Kaplan

The concept of BSCs was first introduced in 1992 by

True

Without timely data

Delivery Cycle Time

the total incurred from the time an order is placed by the customer and up to the time it is shipped to the customer.

Productivity

it measures the relationship between actual inputs used (both quantities and costs) and actual outputs produced.

Partial Productivity

compares the quantity of output product with the quantity of an individual input used.

Total Productivity

the ratio of quantity of output produced to the costs of all inputs used based on current period prices

True

Innovation & Learning metrics sustain long-term improvement in customer and internal performance. T/F

True

Strategy must connect operational gains to revenue growth or cost savings. T/F