ACCA APM flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

Mission statement

A declaration of an organisation's fundamental purpose, values and scope that guides strategy formulation and distinguishes it from similar organisations.

SMART objectives

Objectives that are Specific, Measurable, Achievable, Relevant and Time-bound, allowing managers to monitor progress and judge whether targets have been met.

Ansoff growth matrix

A two-by-two model plotting products (existing or new) against markets (existing or new) to classify strategies as penetration, product development, market development or diversification.

Porter generic strategies

Cost leadership, differentiation and focus strategies that a firm may adopt to achieve competitive advantage; pursuing none clearly leaves a firm stuck in the middle.

BCG matrix

A portfolio tool classifying business units by market growth and relative market share into stars, cash cows, question marks and dogs to guide resource allocation.

Mendelow stakeholder matrix

A grid mapping stakeholders by power and interest, indicating whether to manage closely, keep satisfied, keep informed or monitor with minimal effort.

Balanced scorecard

A performance framework measuring financial, customer, internal process and learning and growth perspectives, linking objectives, measures, targets and initiatives to strategy.

Strategic drift

A gradual divergence between an organisation's strategy and a changing environment, often unnoticed until performance declines and transformational change becomes necessary.

Return on investment

Divisional controllable profit divided by capital employed, expressed as a percentage; it measures the profit generated per unit of capital invested in a division.

Residual income

Divisional profit less a notional interest charge on capital employed, giving an absolute surplus that reflects profit after charging for the cost of invested capital.

Economic value added

Net operating profit after tax less the product of weighted average cost of capital and invested capital, measuring value created above the full cost of capital.

Material price variance

The difference between standard and actual price per unit multiplied by the actual quantity purchased, showing the financial effect of paying more or less than standard.

Labour efficiency variance

The difference between standard hours for actual output and actual hours worked, multiplied by the standard rate, measuring productivity against the standard.

Transfer price minimum

The minimum acceptable transfer price equals marginal or variable cost of the transferring division plus the opportunity cost of the units transferred internally.

Fitzgerald and Moon model

A performance framework for service organisations using dimensions, standards and rewards, with standards judged on ownership, achievability and equity.

Controllability principle

Managers should be assessed only on revenues, costs and investments they can influence, so uncontrollable items such as allocated head office costs are excluded from appraisal.

Gross profit margin

Gross profit divided by revenue, expressed as a percentage, indicating the proportion of sales remaining after the direct cost of goods sold.

Operating profit margin

Operating profit divided by revenue, expressed as a percentage, showing profitability before interest and tax relative to sales.

Asset turnover

Revenue divided by capital employed, measuring how many units of sales are generated by each unit of capital invested in the business.

DuPont decomposition

Return on capital employed expressed as operating profit margin multiplied by asset turnover, separating profitability drivers from asset efficiency drivers.

Current ratio

Current assets divided by current liabilities, indicating the extent to which short-term obligations are covered by short-term resources.

Quick ratio

Current assets excluding inventory, divided by current liabilities, a stricter liquidity test because inventory may be slow to convert into cash.

Interest cover

Operating profit divided by finance costs, showing how many times operating profit covers interest payments and hence the degree of financial risk.

Dividend cover

Profit after tax divided by dividends paid, indicating how many times earnings cover the dividend and the extent of retained earnings.

Ratio analysis limitations

Comparisons are distorted by inflation, differing accounting policies, creative accounting and one-off items, and ratios describe the past without explaining causes.

Value for money

Assessment of public and not-for-profit spending using economy of inputs, efficiency of converting inputs to outputs, and effectiveness of outputs in meeting objectives.

Service organisation features

Intangible, heterogeneous outputs produced and consumed simultaneously, so performance measurement must include customer-perceived quality and cannot rely on inventory controls.

Earned value cost variance

Earned value minus actual cost; a positive figure indicates the project has spent less than the value of work completed to date.

Earned value schedule variance

Earned value minus planned value; a negative figure indicates work is behind the schedule baseline for the period.

Multi-national performance distortion

Divisional results are distorted by exchange-rate movements, local inflation and transfer prices, so evaluation should separate controllable from uncontrollable effects.

Risk classification

Grouping risks as strategic, operational, financial or hazard, and applying preventive, detective or corrective controls according to likelihood and impact.

Sustainability reporting

Disclosure of environmental and social performance alongside financial results, extending scorecard measures though such data can be hard to quantify and verify.