Business Acumen – C8 – Flashcards
Unlock all answers in this set
Unlock answersquestion
Key Compentencies for Compensation Professionals
answer
Financial Management, HR management, Resource Management
question
Financial Management
answer
broad understanding of finance, understands ROI of programs, assess performance based on stated objectives,
question
HR management
answer
assesses current and future staffing needs based on organizational goals and budget realities, ensures staff are selected, rewarded and retains, takes corrective action, understand org design principles
question
Resource Management
answer
determines sources collects to ake fact based decisions, partners, uses efficent and cost effective approaches to things
question
Business Acumen skills and behaviors
answer
mission, vision, values, business strategy, org culture, HR strategy
question
Business Acumen for Comp Professionals
answer
demonstrate influencing and negotation skills, be expert with data, navigate regulatory challenges
question
Importance of business acumen
answer
contributes to org success, engages with senior leaders, self improvement and career development
question
BA: contributes to org success
answer
develop framework for thinking strategically, be able to explain the ROI of initiatives and the value to the business
question
BA: engaging with executive leadership
answer
thinking as business leader, helps other to see you as a leader
question
BA: self-improvement and career development
answer
be able to see the connections between your actions and the greater organization, better able to plan, organize and guide activities, confidence building.
question
why are orgs in business
answer
money! (mission, vision, values, strategy, profit model.
question
STRATEGY
answer
broad framework of priniciples and approaches that guide day to day decisions affecting the business. including how the company positions itself in the market
question
Competitive strategy
answer
three primary strategizes: operational excellence, product/service leadership, customer intimacy
question
operational excellence
answer
price/cost based strategy that includes a combination of price, quality, and dependablity. (good price, everywhere!
question
product/service leadership
answer
innovation-basded strategy that focuses on product deveopment and market exploration (APPLE)
question
customer intimacy
answer
solutions based strategy that focuses on creating results for the carefully selected customers by building bonds to meet/exceed customer needs
question
market position
answer
STAR, QUESTION MARK, DOG, CASH COW
question
STAR
answer
high market share, high growth potential
question
Question market
answer
low market share, high growth potential
question
DOG
answer
low market share, low growth potential
question
CASH COW
answer
high market share but low growth potential. solid steady money maker
question
business life cycle
answer
start-up, growth, mature, decline
question
start up
answer
little or no formal policies or procedures, focusing on gaining capital, initial sales
question
growth
answer
focused on growing sales, increasing distribution capacity, starting to standardize things
question
mature
answer
focus on maintaining market share, improving productivity. higher level of bureacracy and a good amount of cash on hand
question
decline
answer
revenues are declining, must decided to reinvest in current products or create new ones.
question
linking business strategy with Comp Strategy
answer
investment in resources, fixed and variable compensation, market competitive posture
question
investment in resources
answer
may be willing to invest more if they see a high rate of return on that investment
question
fixed and variable compensation
answer
align variable compensation with the business goals
question
market competitive posture
answer
decide what your company strategy is: lead, lag, lead-lag
question
alignment of compensation strategy
answer
an org's comp strategy should be aligned with it's total rewards and overall HR strategy,
question
qualitative data
answer
the people side of the data - use this information to help frame successful appeals
question
quantitative data
answer
the numbers data. get the facts straight
question
multiple perspectives
answer
look at things from different viewpoints: operating departments, human resources, legal, finance, investor
question
operating departments
answer
look at the day to day
question
hr position
answer
need to attract, retain, and reward people
question
legal
answer
must be comply with local, regional and national laws and regulations
question
finance,
answer
can we make more money doing this? spend wisely
question
investor position
answer
how will this help the bottom line?
question
collaborate
answer
contribute to the goals, identify key influencers and decision makers, consider how they achieve their objectives, give special consideration to partnerships with finance
question
individual contributors
answer
have the ME perspective
question
Manager
answer
Me and MY staff
question
Executives
answer
Me, my staff and the organization
question
presenting to Executives
answer
articulate the problem, provide relevant data, recommend a solution
question
why orgs use financial reports
answer
standardize data across companies and industries, promote consistency of financial communication, provide information to key stakeholders
question
types of financial reports
answer
annual report 10K, quarterly report 10Q
question
types of financial statments
answer
balance sheet, income statment, cashflow statement
question
balance sheet
answer
shows financial position on specific date - shows the fiscal health of the company
question
income statement
answer
covers a period of time, shows profitablity
question
cash flow statements
answer
explains the change during the period in case and cash equivalents
question
sources of capital
answer
profits, equity, debt
question
profits
answer
money from sales
question
equity
answer
money investers pay for shares of the company
question
debt
answer
money borrowed usually in the form of loans.
question
profit measures
answer
revenue, gross profit, EBIT, EBITDA, net income, EPS
question
Revenue
answer
top line or starting point of an organization income
question
gross profit
answer
how much the org earns from each unit sold
question
EBIT
answer
earnings before interest and taxes, also called operating profit, how much the company earns before financing the business
question
EBITDA
answer
earnings before interest, taxes and depreciation and amortization. same as EBIT plus annual charge for capital investments
question
Net income
answer
earnings available to equity owners after paying debt and taxes
question
EPS
answer
earnings per share
question
profit measures: growth
answer
growth rwates look at how fast the org is growing
question
margins
answer
look at how much the org earns per dollar of revenue
question
market metrics
answer
measure the potential gap between sharehold and management expectations for the futures
question
price to earnings ratio
answer
stock price/net earnings per share
question
price to EBIT/EBITDA ratio
answer
stock price/ EBIT or EBITDA
question
price to revenue
answer
stock price/net sales per share
question
market to book
answer
stock price/book value per share
question
TSR - total sharehold return
answer
measure the total return shareholders have earned on their investment
question
working capital efficiency
answer
describes how quickly the org is conversting short term capital into cash. A/R turnover/days recievable, inventory turnover/days inventory; payables turnover/ days outstanding
question
return on capital
answer
describes how effectively the org is investing in capital
question
return on equity
answer
net earnings/shareholder equity
question
return on assets
answer
net earnings/total assets
question
return on capital/invested
answer
net operating profit after taxes/invested capital
question
accural accounting
answer
revenues and expenses are recorded when they occur, regardless of when the cash flows
question
accrued revenue
answer
recording a profit when the customer is shipped item and invoiced
question
accrued expenses
answer
expeness are recorded when they happen, not when the are paid
question
evaluating the org fiscal state
answer
this is done to make decisions based on expected return, occurs in annual budgeting and long range planning
question
forecasting
answer
determines what the future holds based on historical data and external factors
question
forecasting questions
answer
how much profit are we earning? how fast are we growing? where do we have to invest to generate profit
question
business analytics
answer
extensive use of data, statiscal and quantitative analysis, explanatory and predictive modelin and fact based management to drive decision making
question
strategic analysis
answer
evaluating the industry and market economics, understand your business and it's competitive strenghts, determine possible future changes
question
data analysis
answer
look for gaps - what might be missing, trends - what key messages are emerging over time
question
key performance indicators
answer
cost analysis, cost leverage, operating profit, marginal cost
question
fixed cost
answer
do not vary for each dollar of revenue - audit fees, # of corp staff, rent
question
variable cost
answer
vary for each dollar of revenue, often a a consistent rate. cost of running macines, raw materials cost
question
cost leverage
answer
performance indicate,
question
operating profit
answer
profits accellearte when you sell more for the same level of fixed cost, great when variable costs don't increase as revenue increase
question
marginal cost
answer
similar to operating profit - software companies. the cost to make the software is the same - the ratio of cost to revenue changes as more copies are sold.
question
balanced scorecard
answer
looks at financials, customers, internal processes, innovation and learning
question
budgeting
answer
driven by forecasting then setting the finances in stone based on the org expectations
question
how compensation impacts budgeting
answer
every EE is an expense
