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Definition
| Plans Dealing with the acquisition and use of resources over a specified period |
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Definition
| The cornerstone of good management; involves developing objectives and goals for the organization, as well as the actual preparation of budgets |
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Definition
| Involves day to day decision making by managers, which is often facilitated by budgeting |
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| Control (with respect to Budgets) |
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Definition
| Involves ensuring that the objectives and goals developed by the organization are being attained; often involves a comparison of budgets with actual performance and the use of budgets for performance evaluation purposes |
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Definition
| Requires managers to build budgets from the ground up each year |
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| a budgeting process that starts with departmental managers and flows up through middle management and then to top management. Each new level of management has responsibility for reviewing and negotiating any changes in the proposed budget. |
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Definition
| Consists of an interrelated set of budgets prepared by a business |
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| combines with the sales budget to form the starting points in the preparation of production budgets for manufacturing companies, purchases budgets for merchandising companies, and labor budgets for service companies. |
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| used in planning the cash needs for manufacturing, merchandising, and service companies |
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| Used to plan for the short term (typically one year or less) |
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Definition
| used to forecast how many units of product to produce in order to meet the sales projections |
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| Material Purchases budget |
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Definition
| Used to project the dollar amount of raw materials purchased for production |
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Definition
| Used to project the dollar amount of direct labor cost needed for production |
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| Manufacturing overhead budget |
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Definition
| used to project the dollar amount of manufacturing overhead needed for production |
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Definition
| used to project the amount of cash expected to be received from sales to customers and cash collections from customers |
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| Cash Disbursements budget |
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Definition
| used to project the amount of cash to be disbursed during the budget period |
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Term
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Definition
| shows cash receipts and cash disbursements, along with any required borrowing or repayments made during the month |
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| Pro Forma financial statements |
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Definition
| budgeted financial statements that sometimes are used for internal planning purposes but more often are used by external users |
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Definition
| Budgets that are set at the beginning of the period and remain constant throughout the budget period |
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Definition
| Budgets that take differences in spending owing to differences in volume out of the analysis by budgeting for labor (and other costs) on the basis of the actual number of units produced |
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Definition
| Allows managers to see whether sales, production, and manufacturing costs are higher or lower than planned and, more important, why actual sales, production, and costs differ from those budgeted. |
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| Control (with respect to Variance Analysis) |
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Definition
| Involves the motivation and monitoring of employees and the evaluation of people and other resources used in the operations of the organization. |
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Definition
| the process of taking action only when actual results deviate significantly from planned results |
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| a budget for a single unit of service |
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Definition
| the budgeted amount of materials, labor, or overhead for each product |
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Definition
| the budgeted price of the materials, labor, or overhead for each unit |
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Definition
| a method of setting standards that examines the production process in detail to determine what it should cost to produce a product |
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Definition
| a standard that is attained only when near perfect conditions are present |
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Definition
| a standard that should be attained under normal, efficient operating conditions |
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Definition
| the difference between the flexible budget operating income and actual operating income |
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Definition
| the difference between the actual sales price and the flexible budget sales price, times the actual sales volume |
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Definition
| the difference between the actual price and the standard price, times the actual volume purchased |
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Definition
| the difference between the actual quantity and the standard quantity, times the standard price |
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Definition
| the difference between the amount of fixed overhead actually incurred and the flexible budget amount; also known as the spending variance |
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Definition
| the difference between the flexible budget amount and the fixe overhead applied to products |
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Term
| Decentralized organizations |
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Definition
| organizations in which decision-making authority is spread throughout the organization |
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Term
| Responsibility accounting |
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Definition
| an accounting system that assigns responsibility to a manager for only those areas which are under that manager's control |
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Definition
| an organizational segment, or division, in which the manager has control over costs but not over revenue or investment decisions |
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Definition
| Provides key financial and non-financial measures of performance for a particular segment |
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Definition
| An organizational segment, or division, in which the manager has control over revenue but not costs or investment decisions |
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Definition
| An organizational segment, or division, in which the manager has control over both costs and revenue but not investment decisions |
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Definition
| an organizational segment, or division, in which the manager has control over costs, revenue, and investment decisions |
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Term
| Strategic Business unit (SBU) |
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Definition
| Another term for an investment center |
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Term
| Segmented income statements |
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Definition
| reports that calculate income for each major segment of an organization in addition to the company as a whole |
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Term
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Definition
| all costs attributable to a particular segment of an organization but only those costs that are actually caused by the segment |
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Definition
| indirect costs that are incurred to benefit more than one segment and that cannot be directly traced to a particular segment or allocated in a reasonable manner |
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Definition
| the profit margin of a particular segment of an organization, typically the best measure of long-term profitability |
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| Return on Investment (ROI) |
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Definition
| measures the rate of return generated by an investment center's assets |
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Definition
| for each sales dollar, the percentage that is recognized as net profit |
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Definition
| the measure of activity used in the ROI calculation; it measures the sales that are generated for a given level of assets |
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Definition
| Net income from operations before interest and taxes |
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Term
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Definition
| typically include cash, accounts receivable, inventory, and the property, plant and equipment needed to operate a business |
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Definition
| The amount of income earned in excess of a predetermined minimum rate of return on assets |
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Definition
| an approach to performance measurement that uses a set of financial and non-financial measures that relate to the overall strategy of the organization |
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Definition
| a measure of the relationship between outputs and inputs |
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Definition
| the total time a product is in production, including process time, inspection time, wait time, and move time; cycle time includes both value-added and non value-added time |
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Definition
| the amount of product produced in a given amount of time, such as a day, week, or month |
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Term
| manufacturing cycle efficiency (MCE) |
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Definition
| the value-added time in the production process divided by the throughput, or cycle time |
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Definition
| usually defined as meeting or exceeding customers' expectations |
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Definition
| a system of improvement based on a series of gradual and often small improvements |
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Definition
| a system of standardizing manufacturing processes to improve efficiency |
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Definition
| costs incurred to prevent product failures typically related to design and engineering |
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Term
| appraisal (detection) costs |
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Definition
| costs incurred to inspect finished products or products that are in the process of production |
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Definition
| Costs incurred once the product is produced and then determined to be defective |
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Term
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Definition
| costs incurred when a defective product is delivered to a customer |
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Term
| Examples of Prevention costs |
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Definition
design and engineering costs
quality training
supervision
quality improvement projects
training and technical support provided to suppliers |
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Term
| Examples of Appraisal (Detection) Costs |
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Definition
Inspecting raw materials
testing goods during the production process
final product testing and inspection |
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Term
| Examples of Internal Failure Costs |
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Definition
Material, Labor, and other manufacturing costs incurred in rework
Scrap
Spoilage
Downtime
Design Changes
Re inspections
Disposal of Defective products |
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Term
| Examples of External Failure Costs |
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Definition
Repairs made under warranty
Replacement of defective parts
Product recalls
Liability costs from defective products
lost sales |
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Term
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Definition
| the right to buy a share of stock at a set price (called the option price or strike price) at some point in the future |
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Term
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Definition
| a form of management compensation in which employees receive shares of stock with restrictions such as requirements to stay with the company for a set length of time or requirements to meet established performance measures |
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Term
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Definition
| an analysis of financial statements over time |
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Term
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Definition
| horizontal analysis of multiple years of data |
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| Common size financial statements |
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Definition
| statements in which all items have been restated as a percentage of a selected item on the statements |
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Definition
| the excess of current assets over current liabilities, which is a measure of an entity's liquidity |
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Definition
| a measure of the ability of a company to meet its immediate financial obligations |
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Definition
| a measure of an entity's liquidity; also known as working capital ratio |
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Term
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Definition
| a stricter test of a company's ability to pay its current debts with highly liquid current assets |
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Term
| Accounts Receivable Turnover Ratio |
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Definition
| one of the best measures of the efficiency of the collection process |
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Definition
| a measure of the number of times the value of inventory is sold in one year |
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| Cash to cash operating cycle ration |
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Definition
| a measure of the length of time between the purchase of inventory and the eventual collection of cash from sales |
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Definition
| A solvency measure focusing on the amount of capital provided by creditors |
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Definition
| A measure of the company's ability to meet current interest payments to creditors |
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Term
| Debt Service Coverage Ratio |
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Definition
| A measure of the amount of cash generated by operating activities that is available to repay principal and interest in the upcoming year |
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| Ratio of cash flow from operations to capital expenditures |
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Definition
| a measure of a company's ability to use cash flow from operations to finance the acquisition of property, plant, and equipment |
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Definition
| a measure of return to investors on all assets invested in the company |
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| Return on Common Stockholders' equity (ROCSE) |
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Definition
| a measure of return to common stockholders as a percentage of stockholders' equity |
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Definition
| a key measure of performance that is often used to compare companies of different size |
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Term
| Price-Earnings (P/E) ratio |
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Definition
| a measure of the current price of a company's stock in comparison to its earnings. Theoretically, the P/E ratio tells us something about how investors think that a company's stock will perform in the future compared with other companies' stock |
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Term
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Definition
| Include acquiring and selling products in the normal course of business |
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Term
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Definition
| include cash flows from selling or repurchasing capital stock, long-term borrowing, and contributions from owners |
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Term
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Definition
| an item that can be readily converted to a known amount of cash and that has an original maturity of three months or less to the investor |
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Term
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Definition
| include the purchase and sale of property, plant, and equipment; the purchases and sale of securities; and loans made as investments |
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Term
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Definition
| Reports cash collected from customers and cash paid for inventory, salaries, wages, and so on |
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Term
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Definition
| starts with net income and removes the impact of non-cash items and accruals |
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