387 Index A Absenteeism rate, 239 Accounting, 26, 93 Definition, 3 Accounting system, 14 Accrual accounting, 176, 182, 194 Activity-based budgeting, 141 142, 150 Activity-based costing, 67 69, 71, 93, 150 Activity-based management control, 73, 93 Ad hoc report, 40, 41, 58 After-sales services, 318, 333, 350 Alternative budgeting approaches overview, 134 Alternative value concepts, 290 Arm s length transaction, 164, 194 Aspiration budget, 121, 122, 128 Asset management ratios, 213 Assets, 157 162, 194 Asset utilization, 214 B Balanced scorecard, 303, 326, 350 application in corporate practice, 345 cause-and-effect links, 335 criticism, 347 customer perspective, 332 developing, 339 features, 337 financial perspective, 331 genesis, 327 internal business process perspective, 332 key characteristics, 328 learning and growth perspective, 334 strategy map, 335, 340 structure, 329 template, 331 Balanced Scorecard strategic management system, 342 Balance sheet, 158, 194 concepts, 164 elements, 158 Batch-level activities, 67, 93 BCG s portfolio matrix, 321 323 Behavioral accounting, 363, 377 Benchmarking, 244 245, 247, 251 best-in-class benchmark, 245 Better budgeting, 144, 151 Beyond budgeting, 147, 151 Big data, 20, 54, 372, 374 375, 377 Book value, 163 Budget, 26, 98, 128, 151 communication, 102 coordination, 102 gaming, 125, 128, 151 lapsing, 126, 128, 136, 151 manipulation, 125 master budget, 102 operating budget, 104 performance evaluation, 102 planning tool, 101 strengths, 126 translate strategy into financials, 101 uses, 101 weaknesses, 127 Budgetary slack, 125, 128 Budgeted cash flow statement, 118 119 Budgeted income statement, 112 Budgeting, 75, 97, 128, 151 alternative approaches, 133 bottom-up, 123, 124 improvement approaches, 144 motivational aspects, 121 strengths, 126 top-down, 123 weaknesses, 127 Budgeting cycle, 100 Budget preparation, 7, 295 Business analyst, 375, 377 Business ethics, 23, 26 Business unit, 311, 350 Business-unit level strategies, 309, 311 Business-unit strategies, 311, 350 C Capacity utilization, 240 Capital asset pricing model (CAPM), 273, 298 Capital budgeting, 7, 9, 89, 293, 295 Capital employed (CE), 172, 194, 219, 251, 269, 281, 298 Capital structure, 222, 224, 230, 235, 271 optimum, 285 Cash budget, 114 115, 119, 128 Cash conversion cycle, 217, 251 Cash flow return on investment (CFROI), 291, 292, 298 Cash flows financing activities, 187 investing activities, 186 operating activities, 184 Cash flow statement analyzing, 189 basic structure, 181 budget, 118 direct method, 182 indirect method, 182 183 preparing, 182 sources and uses of cash, 182 Cash flow statement, 180, 195 Cash ratio, 233 Cash value added (CVA), 291, 298 Click through rate (CTR), 242 Code of ethics, 24 Commanding, 3 Communication, 38, 46 Company goals, 48, 260 Company organization, 48 Conflict of interest, 113, 148, 358 Continuous improvement budgeting, 146, 151 Charifzadeh508211_bindex.indd 387 9/6/2017 7:40:13 AM
388 Index Continuous improvement process (CIP), 146, 151 Contribution margin, 86, 93 Contribution margin method, 86 87 Control, 26 Definition, 4 Controller, 9 10, 26 Controlling, 26 Control system, 4 Cooperative reporting, 56, 58 Coordinating, 3 Corporate governance, 22, 26, 261 Corporate-level strategies, 309 310, 350 Corporate social responsibility (CSR), 23, 347 Cost, 93 Cost accounting, 93 vs. cost management, 62 Cost allocation, 65, 93 Cost assignment, 93 Cost center, 71, 73, 74, 93, 141 Cost driver, 93 Cost management, 93 approaches, 65 focus, 63 tools, 64 vs. cost accounting, 62 Cost of capital, 266, 271, 276, 285, 298 Cost of equity, 272, 298 Cost of goods sold, 110, 120, 128, 175, 207, 215, 217 Cost of goods sold budget, 110 Cost reduction, 74 Current assets, 162, 194 Current liabilities, 163, 194 Current ratio, 232 Customer churn rate, 241, 251, 333 Customer perspective, 332, 350 Customer related performance, 156 D Data, 58, 373 aggregation, 45 combination, 45 decomposition, 45 extension, 46 selection, 46 Data scientist, 375, 377 Data sources, 44 Days payable outstanding (DPO), 217, 252 Days receivables outstanding (DRO), 216, 252 Days sales in inventory (DSI), 215, 252 Days working capital (DWC), 218, 220 221, 252 Debt-to-equity ratio, 224 Deductive method, 43, 58 Delivery reliability, 237 Derivative financial instrument, 162, 194 Design-to-cost, 317, 350 Design-to-cost method, 75, 93 Digitization, 20, 26, 372 Direct costs, 94, 107 Direct labor budget, 108 Direct materials budget, 107 Disruptive technologies, 321, 351 DMAIC, 360 Double-loop learning, 345, 351 Drifting cost, 78, 80 83, 94 DuPont system, 234, 236, 252 E Earnings before interest and taxes (EBIT), 178, 194 Earnings before interest, taxes, depreciation, and amortization (EBITDA), 179, 194 Earnings before taxes (EBT), 177, 194 EBITDA-to-interest ratio, 224, 225 EBIT margin, 207 Ecological environment, 314 Economic environment, 313 Economic profit, 290, 298 Economic value added (EVA), 267, 298 adjustments, 277 calculating, 274 criticism, 289 formulas, 267 numerical example, 274 portfolio management decisions, 286 superior performance measure, 278 value driver tree, 282 Employee compensation, 8, 296 Employee related performance, 156 Employee satisfaction, 239 Encyclopedia-style report, 47 Environmental analysis, 313 Environmental management accounting, 366, 378 Equity multiplier, 224, 235 Ethical aspects, 23 Expectation budget, 121, 122, 129 Experience curve, 322, 351 External effects, 260, 367, 378 F Facility-level activities, 69, 94 Fast close report, 53, 58 Financial accounting, 14, 26 integration, 23, 370 Financial Accounting, 14 vs. Management Accounting, 14 Financial budget, 114, 129 Financial debt, 165 166, 194, 298 Financial information, 156 Financial leverage, 228, 235, 252 Financial leverage ratios, 222 Financial performance, 155, 328, 323 measuring, 156 Financial perspective, 331, 332, 351 Financial ratios, 203 Financial statements, 153 overview, 157 Fixed asset turnover, 214 Flash report, 53, 58 G Gearing, 224, 231, 252 Generally accepted accounting principles (GAAP), 248, 252 Generic strategies, 317 Goal of a business firm, 258 Goodwill, 164 Gross profit margin, 207 Growth, 259 H Homo oeconomicus, 364, 378 Horizontal networks, 357, 378 Human behavior, 363 Human resource management, 238 Hybrid strategy, 318, 351 Charifzadeh508211_bindex.indd 388
Index 389 I IFRS, 22, 157, 248 Income statement, 173, 194 budget, 112 function-of-expense method, 175 nature-of-expense method, 174 Incremental budgeting, 135, 151 Indicators, 200, 252 Indirect costs, 94 Inductive method, 42, 58 Industry analysis, 315 Information, 31, 373 amount, 46 catalogue, 58 definition, 58 demand, 32 33, 58 needs, 30, 33, 36, 58 processing, 37 retrieval, 37 sources, 37, 44 storage, 37 supply, 32 33, 58 usage, 38 Innovation, 333 Innovation and learning perspective, 329, 334, 351 Innovation related performance, 156 Intangible assets, 20, 161 Integrated reporting, 368, 371, 378 Integrating reporting, 368 370 Interest coverage, 224 Internal process perspective, 332, 351 Internet, 20 Inventory, 106, 111, 207, 215, 216, 219, 232, 243 Inventory turnover, 215 Invested capital (IC), 291, 298 Investor relations, 295, 298 J Jobs, 259 Just-in-time, 219, 252 K Kaizen, 146, 151 Kaizen budgeting, 151 Key performance indicators (KPI), 199, 247, 252 L Lagging indicators, 331, 351 Leading, 3 Leading indicators, 331, 351 Lean Production, 219, 241 Legal and political environment, 313 Leverage effect, 228, 230, 252 Liabilities, 162, 163, 194 Life cycle costing, 83, 91, 94 contribution margin method, 86 87 cost elements, 85 discounting method, 88 90 life cycle costs, 84 life cycle revenues, 84 revenue elements, 85 vs. traditional costing, 84 Liquidity, 181, 231 233 Liquidity ratios, 231 Locked-in costs, 74 Logistics, 237 M Management Defintion, 2 Interplay, 7 Management accounting, 5, 27 definition, 58 future challenges, 356 human behavior, 363 integration, 23 interplay, 7 issues, 356 networks, 357 new developments, 355 quality, 359 six sigma, 359 supply chains, 357 trends, 20 vs. Financial Accouting, 14 Management by exception, 18, 41 Management control, 6, 27 elements, 8 function, 12 interplay, 7 new developments, 355 trends, 20 Management control function, 295 Management report ad hoc report, 41 communicating, 46 content, 42 deductive methods, 43 duration of preparation, 51 inductive methods, 42 order, 47 preparing, 46 presentation, 50 punctuality, 52 size, 47 standard report, 40 structure, 47 timeliness, 52 variance report, 41 visualization, 50 Management reporting, 27 definition, 35, 58 dimensions, 38 39 key information tool, 34 parties involved, 53 periodicity, 51 process, 36 purposes, 40 reporting cycles, 50 scope, 35 timing issues, 50 trends, 54 Manufacturing, 240 Manufacturing costs per unit, 109 Manufacturing overhead budget, 108 Market capitalization, 194 Marketing, 241 Market related performance, 156 Market share, 259, 351 Market value, 163 Market value added (MVA), 293, 299 Master budget, 102, 103, 129 Matching principle, 110, 194 Maximizing profits, 259 Mid-term plan, 98, 129 Minimizing costs, 259 Monitoring, 3, 309 Motivation, 122 Multi-step profit cascade, 176 N Net debt, 167, 195, 252 Net debt-to-ebitda, 225 Net operating assets (NOA), 270, 299 Net operating profit after taxes (NOPAT), 269, 299 Net operating profit less adjusted taxes (NOPLAT), 291 Charifzadeh508211_bindex.indd 389
390 Index Net present value (NPV), 89, 286, 293, 299 Net working capital, 170, 195, 218, 219, 232, 252 change, 191 Non-current assets, 159, 195 Non-current liabilities, 162, 195 Non-financial debt, 166, 195, 299 Non-financial metrics, 21 Non-financial performance measures, 237 Non-manufacturing costs budget, 111 O One-page report, 47 Operating budget, 104, 113, 129 Operating management accounting, 304 Operational planning, 7, 98, 295 Operations, 15, 17, 34, 191, 333 Opportunities, 325 Organizing, 2 Other comprehensive income (OCI), 176, 195 Owners equity, 163, 209, 262 P Participative budgeting, 124, 129 Payback period, 86, 94 Peer group, 252 Peer group analysis, 244, 252 Performance, 17, 27 Performance indicators, 200, 252 categorization, 201 Performance measurement, 8, 17, 27, 153, 195, 199 beyond financials, 19 different areas, 155 importance, 154 Performance measures, 201, 252 business, 243 human resource management, 238 logistics, 237 manufacturing, 240 marketing, 241 non financial, 237 systems, 233 Performance reporting categories, 17 example, 17 Period cost, 111, 129 PESTEL analysis, 315 Planning, 2, 75, 98 99, 122 Porter s five-forces model, 315 Portfolio management decisions, 286 Price elasticity of demand, 242 Pricing, 74, 283 Process-based costing, 70 71, 94 Process-Based Management Control, 73 Process efficiency improvements, 74 Process related performance, 155 Product design, 74 Production budget, 106 Productivity, 240 Product life cycle, 21, 82, 85, 91, 322, 351 Product life cycle analysis, 319 Product mix, 74 Product portfolio, 321 Product-sustaining-level activities, 69, 94 Product variety, 21 Profitability ratios, 205 Profit margin, 205 Provision, 162, 195 Q Quality, 241, 333, 337, 359 Quick ratio, 232 R Ratio, 201, 253 Reject rate, 241 Replacement time, 238 Reporting cycles, 50 Reporting factories, 54, 58 Residual income, 266, 299 Resource allocation, 7, 148, 295, 310, 344 Retained earnings, 163, 176, 195, 209 Return on assets (ROA), 209, 229, 253, 264 Return on capital employed (ROCE), 210, 253, 271, 299 underinvestment problem, 279 Return on equity (ROE), 209, 229 231, 234 236, 253 Return on invested capital (ROIC), 210, 253, 299 Return on investment ratios, 208 Return on net assets (RONA), 210, 253 Return on sales, 207 Revenue budget, 105 S Sarbanes-Oxley Act (SOX), 22 Self-reporting, 55 Service design, 74 Shareholder vs. Stakeholder, 263 Shareholder value, 299 creation, 265 justification, 261 measuring, 265 overall goal, 260 Single-loop Learning, 345 Sinking fund depreciation, 290, 299 Six sigma, 359, 361 362, 378 Skill set, 10 Social environment, 314 Staff fluctuation rate, 239 Stakeholder, 263, 299 Standardization, 53 Standard report, 53, 55, 58 Statement of cash flows, 180, 182 budgeted, 118 Strategic management accounting, 303 304, 351 instruments, 312 Strategic management process phases, 307 role of the controller, 307 Strategic management system, 342 Strategy, 6, 304, 351 business-unit level strategies, 309 corporate-level strategies, 309 finding and formulating, 307 generic strategies, 317 hybrid strategy, 318, 351 implementing, 308, 338 testing, 338 Strategy map, 335, 336, 340, 351 Strengths, 324 Superior performance measure, 278 Supply chain, 22, 56, 219, 238, 243, 319, 357, 358, 359, 378 Supply chain cycle time, 238, 253 Survival, 259 Sustainability, 23, 260 SWOT analysis, 323, 326, 351 Systematic risk, 273, 274, 299 Charifzadeh508211_bindex.indd 390
Index 391 T Target cost diagram, 81, 94 Target cost index, 81, 94 Target costing, 75, 82, 94 cost gap, 76 Logic, 76 process, 77 Target cost matrix, 80 Tax shield, 269 Technological environment, 314 Threats, 325 Throughput time, 241 Time, 48, 333 Time dimension, 211 212 Times-interest-earned (TIE), 224 Time trend analysis, 243, 253 Top-down budgeting, 123 Total assets, 164, 209 Total asset turnover (TAT), 213, 253 Total debt ratio, 222 Traditional performance measures, 264 U Unit-level activities, 67, 94 Unsystematic risk, 273, 274, 299 US GAAP, 22, 158, 248, 264 V Value-based incentive systems, 296 Value-based management systems, 294 Value-based management (VBM), 294, 299 Value-based performance measurement, 257, 295 Value chain, 48, 318, 319, 333, 351, 357, 378 Value chain analysis, 318 Value creation, 21, 263, 264, 268, 282, 293 Value driver tree, 282 Variance report, 58 Vertical networks, 357, 378 Volume-based cost allocation, 65 W Weaknesses, 325 Weighted average cost of capital (WACC), 267, 268, 271, 274, 276, 279, 281, 285, 299 Z Zero-based budgeting, 137 139, 151 Charifzadeh508211_bindex.indd 391
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