In this video tutorial, accounting professor Kay Stice explains traditional accounting or financial measures, including profit margin, average collection period, sales per square foot, current ratio, debt ratio and Return on Equity (ROE). He explores their impact on the balanced scorecard and key performance indicators (KPIs) for long-term profitability.
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- Traditional accounting measures…have only included financial measures,…and in a strict, ruthlessly capitalistic sense,…that's all that matters, so in that sense,…you can view the other three dimensions…of the balanced scorecard as being dimensions…that ultimately feed into improving long term profitability.…Now here are just a few examples…of those traditional financial measures.…Profit margin. How many dollars of profit…does a company make from each 100 dollars in sales?…For example, for Walmart, this number is four.…For Microsoft, it's 25.…
These companies track these numbers from year to year…and also benchmark with their competitors.…Another financial measure, average collection period.…How many days does it take a company…to collect its cash from its credit customers?…If that number's too big, meaning that…the collection period is too long,…then cash that could be used to pay bills…is still in the pockets of the customers.…This increases the need for short term borrowing…and raises the cost of doing business.…
In this course, accounting professors Jim and Kay Stice explain what KPIs your business should consider in a balanced scorecard, from financial goals to employee and customer satisfaction. They describe how to craft a clear mission statement that complements your KPIs, and how to tie performance to incentives. Plus, get a look at KPIs in action, as Jim and Kay break down a case study examining a trucking company's balanced scorecard.
- The importance of KPIs and measuring performance
- Financial goals and measure
- Customer needs and satisfaction
- Employee growth
- Creating an effective mission statement
- Linking measurements and rewards
- Examining a KPI case study