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Course Description
A typical business churns out an enormous amount of financial and operational information, which can be difficult to sort through to see how a company is performing. Ratios and other measurements can play a valuable role in analyzing this information. In addition, a system of measurements can be used to monitor and control the operations of an organization. This course describes more than 200 ratios and other measurements that can be used to analyze the results, liquidity, and cash flows of a business. General analysis topics include measurements for such areas as performance, liquidity, cash flow, return on investment, and share performance. More specific functional analysis topics include measurements for such areas as cash management, credit and collections, fixed assets, inventory, and product design.
Instructor
Learning Objectives
Upon successful completion of this course, participants will be able to:
Chapter 1
- Recognize the circumstances under which certain measurements should be used.
Chapter 2
- Note the contents of the various performance measurements and the factors they are intended to compare.
Chapter 3
- Recognize the components of the cash conversion cycle and the ratios derived from it.
Chapter 4
- Identify the contents of the free cash flow concept and the measurements related to cash flow.
Chapter 5
- Cite the situations in which return on investment measurements can be used and the factors they are intended to compare.
- Recognize the measurements that can be used to reduce the number of unused fixed assets.
Chapter 6
- Identify the parties using share performance measurements and the future conditions that these measurements can indicate.
Chapter 7
- Identify the adjustment factor used for deflated growth measures and the situations in which these measurements are used.
Chapter 8
- Note the key factors to be monitored in a system of constraint management.
Chapter 9
- Recognize the contents of the cash management measurements and when their results should trigger an investigation.
Chapter 10
- Identify the behaviors on which credit and collection measurements are intended to focus attention.
Chapter 11
- Recognize the conditions that can be uncovered through use of customer service measurements.
Chapter 12
- Identify the situations in which certain facility-related measurements should be used.
Chapter 13
- Cite the measurements used to examine the ability to pay and the situations in which these measurements can be used.
Chapter 14
- Identify the situations in which fixed asset measurements can be most gainfully employed and when they are of reduced value.
Chapter 15
- Identify the types of behaviors that certain human resources measurements can be used to track.
Chapter 16
- Recognize the effects of using certain inventory measurements.
Chapter 17
- Note the effects that can skew the outcomes of payroll-related measurements.
Chapter 18
- Cite the effects of price elasticity on profitability and how elasticity can be altered.
Chapter 19
- Recognize the measurements that can track the performance level of a production process and the usage of inventory.
Chapter 20
- Note the measurements that should be used to focus attention on the development of products.
Chapter 21
- Identify the purchasing measurements most useful for monitoring progress toward supplier certification and reduction as well as the use of procurement cards.
Chapter 22
- Cite the situations in which certain payables measurements can yield incorrect or skewed results.
Chapter 23
- Recognize the measurements used to monitor different types of sales and marketing behaviors.
Table of Contents
Chapter 1 – Overview of Measurements
Learning Objectives
Introduction
What to Measure
Mandatory Measurements
Breaking with Tradition
Measurement Usage Levels
Measurement Timing
Measurement Consistency
Measurements and the Soft Close
Measurement Clutter
Limitations of Ratio Analysis
Summary
Chapter 1 Review Questions
Chapter 2 – Performance Measurements
Learning Objectives
Introduction
Overview of Performance Measurements
Sales Returns and Allowances to Sales
Contribution Margin Ratio
Gross Profit Ratio
Operating Income Ratio
Net Profit Ratio
Deflated Profit Growth
Effective Tax Rate
Core Earnings Ratio
Quality of Earnings Ratio
Operating Ratio
Operating Leverage
Breakeven Point
Margin of Safety
Discretionary Cost Ratio
Summary
Chapter 2 Review Questions
Chapter 3 – Liquidity Measurements
Learning Objectives
Introduction
Overview of Liquidity Measurements
Cash Conversion Cycle
Days Sales in Accounts Receivable
Days Sales in Inventory
Days Payables Outstanding
Liquidity Index
Current Ratio
Inventory to Current Assets Ratio
Quick Ratio
Cash Ratio
Defensive Interval Ratio
Net Working Capital Ratio
Working Capital Productivity
Working Capital Roll Forward
Illiquid Asset Conversion Ratio
Solvency Ratio
Summary
Chapter 3 Review Questions
Chapter 4 – Cash Flow Measurements
Learning Objectives
Introduction
Overview of Cash Flow Measurements
Free Cash Flow
Cash Flow Returns
Cash Flow per Share
Cash Flow Return on Sales
Cash Flow Return on Assets
Cash Flow from Operations Ratio
Cash Reinvestment Measurements
Cash Reinvestment Ratio
Funds-Flow Adequacy Ratio
Summary
Chapter 4 Review Questions
Chapter 5 – Return on Investment
Learning Objectives
Introduction
Return on Equity
Economic Value Added
Book Value Analysis
Net Book Value
Tangible Book Value
Book Value per Share
Return on Assets
Return on Assets
Return on Operating Assets
Earnings per Share
Dividend Performance
Dividend Payout Ratio
Dividend Yield Ratio
Summary
Chapter 5 Review Questions
Chapter 6 – Share Performance Measurements
Learning Objectives
Introduction
Overview of Share Performance Measurements
Price / Earnings Ratio
Capitalization Rate
Total Shareholder Return
Market Value Added
Market to Book Ratio
Insider Buy/Sell Ratio
Options and Warrants to Common Stock Ratio
Short Interest Ratio
Institutional Holdings Ratio
Summary
Chapter 6 Review Questions
Chapter 7 – Growth Measurements
Learning Objectives
Introduction
Overview of Growth Measurements
Sales Growth
Deflated Sales Growth
Sales Growth Consistency
Core Sales Growth
Customer Growth
Expense Growth
Profit Growth
Profit Growth
Profit Growth Consistency
Affordable Growth Rate
Summary
Chapter 7 Review Questions
Chapter 8 – Constraint and Throughput Measurements
Learning Objectives
Introduction
Overview of Constraint Measurements
Bottleneck Utilization
Bottleneck Effectiveness
Bottleneck Schedule Fulfillment
Buffer Penetration
Bottleneck Maintenance to Operating Ratio
Bottleneck Rework Processing
Post-Bottleneck Scrap
Manufacturing Effectiveness
Manufacturing Productivity
Manufacturing Effectiveness
Manufacturing Throughput Time
Delayed Throughput
Summary
Chapter 8 Review Questions
Chapter 9 – Cash Management Measurements
Learning Objectives
Introduction
Overview of Cash Management Measurements
Auto Cash Application Rate
Suspense to Receivables Ratio
Actual Cash Position versus Forecast
Average End of Day Available Balance
Earnings on Invested Funds
Unhedged Gains and Losses
Summary
Chapter 9 Review Questions
Chapter 10 – Credit and Collection Measurements
Learning Objectives
Introduction
Overview of Credit and Collection Measurements
Days Sales Outstanding
Best Possible DSO
Collection Effectiveness Index
Measurements Based on Time Buckets
Days Delinquent Sales Outstanding
Average Days to Pay per Collector
Collection Dispute Cycle Time
Deduction Turnover
Average Time to First Contact
Bad Debt Percentage
Collection Performance Report
Average Time to Establish Credit
General Management Measurements
Summary
Chapter 10 Review Questions
Chapter 11 – Customer Service Measurements
Learning Objectives
Introduction
Overview of Customer Service Measurements
On-Time Delivery Percentage
Order Cycle Time
Order Fill Rate
Orders Damaged in Transit
Customer Turnover
First Contact Resolution
Escalation Rate
Caller Abandonment Rate
Incident Volume
Inbound Caller Retention
Customer Opinions
Customer Satisfaction Ratio
Net Promoter Score
Summary
Chapter 11 Review Questions
Chapter 12 – Facility Measurements
Learning Objectives
Introduction
Overview of Facility Measurements
Cost per Square Foot
Occupancy Cost Ratio
Square Feet per Person
Percent of Storage in High-Cost Locations
Floor Space Utilization
Cubic Volume Utilization
Percentage of Storage Bins Utilized
Honeycombing Percentage
Summary
Chapter 12 Review Questions
Chapter 13 – Financing Measurements
Learning Objectives
Introduction
Overview of Financing Measurements
Debt to Equity Ratio
Ability to Pay Measurements
Interest Coverage Ratio
Debt Service Coverage Ratio
Fixed Charge Coverage Ratio
Cash Coverage Ratio
Average Cost of Debt
Borrowing Base Usage
Summary
Chapter 13 Review Questions
Chapter 14 – Fixed Asset Measurements
Learning Objectives
Introduction
Overview of Fixed Asset Measurements
Sales to Fixed Assets Ratio
Accumulated Depreciation to Fixed Assets Ratio
Cash Flow to Fixed Asset Requirements Ratio
Repairs and Maintenance Expense to Fixed Assets Ratio
Summary
Chapter 14 Review Questions
Chapter 15 – Human Resources Measurements
Learning Objectives
Introduction
Overview of Human Resources Measurements
Position Fulfillment Speed
Unfilled Requisitions Ratio
Recruiter Effectiveness Ratio
Intern Conversion Ratio
Cost per Hire
Employee Replacement Cost
Accession Rate
Employee Turnover
Annualized Compensation per Employee
Net Benefits Cost per Employee
Sales per Person
Profit per Person
Administrative Staff Ratio
Ergonomic Injury Rate
Outsourcing Cost Effectiveness
General Management Measurements
Summary
Chapter 15 Review Questions
Chapter 16 – Inventory Measurements
Learning Objectives
Introduction
Overview of Inventory Measurements
Average Inventory Calculation
Inventory Turnover Measurements
Inventory Turnover Ratio
Raw Materials Turnover
Work-in-Process Turnover
Finished Goods Turnover
Inventory Accuracy Percentage
Excess Inventory Measurements
Obsolete Inventory Percentage
Percent of Inventory Greater than XX Days
Returnable Inventory Valuation
Opportunity Cost of Excess Inventory
Summary
Chapter 16 Review Questions
Chapter 17 – Payroll Measurements
Learning Objectives
Introduction
Overview of Payroll Measurements
Payroll Transaction Error Rate
Form W-2c to Form W-2 Ratio
Proportion of Manual Checks
Payroll Entries to Headcount Ratio
Outsourced Payroll Cost per Employee
Summary
Chapter 17 Review Questions
Chapter 18 – Pricing Measurements
Learning Objectives
Introduction
Overview of Pricing Measurements
Price Elasticity of Demand
Cross Price Elasticity of Demand
Throughput per Minute
Proportion of Discounted Prices
Selling Price Variance
Sales Volume Variance
Summary
Chapter 18 Review Questions
Chapter 19 – Production Measurements
Learning Objectives
Introduction
Overview of Production Measurements
Department-Level Performance
Order Cycle Time
Manufacturing Efficiency
Productivity Cause and Effect Ratio
Degree of Unbalance
Operational Takt Time
Equipment Measurements
Equipment Effectiveness
Setup Time
Unscheduled Downtime Percentage
Maintenance and Repair Ratio
Average Run Time
Yield Measurements
First-Pass Yield
Material Yield Variance
Expense Proportions
Indirect Labor to Direct Labor Ratio
Overhead to Direct Cost of Goods Ratio
General Management Measurements
Summary
Chapter 19 Review Questions
Chapter 20 – Product Design Measurements
Learning Objectives
Introduction
Overview of Product Design Measurements
Product Development
Number of Design Platforms
Reused Components Percentage
Design Cycle Time
Bill of Material Accuracy
Financial Outcomes
Percentage of Target Cost Attained
Percentage of New-Product Sales
Return on Research and Development
Warranty Claims Percentage
Summary
Chapter 20 Review Questions
Chapter 21 – Purchasing Measurements
Learning Objectives
Introduction
Overview of Purchasing Measurements
Proportion of Purchase Orders above Threshold
Procurement Card Usage Percentage
Proportion of Spend Managed
Proportion of Spend with Preferred Suppliers
Proportion of Certified Suppliers
Supplier Performance Measurements
Supplier Fulfillment Rate
Supplier Defect Rate
Supplier Billed Price Variance
Economic Order Quantity
Proportion of Targeted Inventory Dispositioned
General Management Measurements
Summary
Chapter 21 Review Questions
Chapter 22 – Payable Measurements
Learning Objectives
Introduction
Overview of Payables Measurements
Transaction Error Rate
Full-Time Equivalent Measurements
FTEs per $1 Million of Revenue
Staff Cost per FTE
Line Items per FTE
Paperless Measurements
Percent of Paperless Invoices
Percent of Paperless Payments
Additional Payables Measurements
Summary
Chapter 22 – Review Questions
Chapter 23 – Sales and Marketing Measurements
Learning Objectives
Introduction
Overview of Sales and Marketing Measurements
Sales Productivity
Incremental Salesperson Effectiveness
Sales Effectiveness
Sales and Marketing as Percentage of Sales
Existing Customer Solicitation Ratio
Order Placement Rate
Sales per Customer
Quote to Close Ratio
Sales Backlog Ratio
Throughput Measurements
Throughput Quoted
Ratio of Throughput Awarded to Quoted
Ratio of Throughput Booked to Billed
Marketing Measurements
Advertising Value Equivalency
Sales to Unique Visitors Ratio
Direct Mail Effectiveness
Market Share
General Management Measurements
Summary
Chapter 23 Review Questions
Review Question Answers and Rationales
Glossary
Index
Qualified Assessment
Answer Sheet
Course Evaluation
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