Quiz 14: Management Accounting in a Changing Environment

Business

Balanced scorecard Balanced scorecard is internal system used to evaluate performance of company. There are four perspectives of balanced scorecard through which performance of company can be evaluated. These include financial perspective, learning and growth perspective, customer perspective and internal business process perspective. a.Implementation of balanced scorecard indicate that firms are trying to link the firm's business plan with that of business performance. G has decided to change its business strategy and has already put in place the decision rights assigning. Balance scorecard would link strategy to performance measurement. Strength of balanced scorecard are described below: • Balanced scorecard would help to provide for training to general managers rather than functional managers. • It would help to focus on managers externally. • It would joint firm's new strategy to become a destination stop. • It would help to resolve division performance measurement by blending own unit and division. • It would link business strategy with performance and compensation plans. Weakness of balanced scorecard are described below: The balanced scorecard of company includes many measurements which makes the system complicated and data collection becomes difficult. This also provides opportunity for manipulation and game planning. It is not clear that benefit of linking compensation to 32 balanced scorecard would help to maximize firm value. This would create problem for lower level managers whose smaller contribution would not be appreciated and others would get paid more compensation. 2. The turnaround in financial performance cannot be solely attributed to balanced scorecard. The strategy, organization structure and all the three legs of organization architecture was also equally responsible for financial turnaround in the company.

Balanced scorecard Balanced scorecard is internal system used to evaluate performance of company. There are four perspectives of balanced scorecard through which performance of company can be evaluated. These include financial perspective, learning and growth perspective, customer perspective and internal business process perspective. Return on invested capital, earnings growth, percent empty seats are financial perspectives used by company to determine their performance. These involve financial numbers. Lost baggage, on time arrivals, number of frequent flyers are classified as customer perspectives as customers are impacted by these while flying and thus lower rate would indicate higher performance. Employee training hours and employee turnover are classified as innovation and learning perspectives as they indicate company's learning process for employees. Lost baggage and on time arrivals are also classified in internal business process as it would indicate efficiency of the company managing this process.

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