CHFP flashcards

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

Gross margin

Revenue minus cost of goods sold, divided by revenue. It measures production and direct-cost efficiency before operating expenses and is used to compare pricing power across firms.

Contribution margin

Price minus variable cost per unit. It shows how much each sale contributes to covering fixed costs and then to profit, and it drives break-even analysis.

Break-even point

The sales volume at which total revenue equals total cost. In units it equals fixed costs divided by contribution margin per unit; beyond it each unit adds profit.

Operating leverage

Contribution margin divided by operating income. It measures how sensitive operating profit is to sales changes; higher fixed costs raise leverage and amplify both gains and losses.

Quick ratio

Cash, marketable securities, and receivables divided by current liabilities. It excludes inventory, so it tests short-term liquidity more strictly than the current ratio.

Cash conversion cycle

Days inventory outstanding plus days sales outstanding minus days payables outstanding. It measures how long cash is tied up in operations; shorter cycles free working capital.

DuPont analysis

Return on equity decomposed into net profit margin times asset turnover times equity multiplier. It shows whether returns come from profitability, efficiency, or financial leverage.

Relevant cost

A cost that is future and differs between decision alternatives. Sunk costs and allocated fixed costs are not relevant because they do not change with the choice.

Customer lifetime value

Expected margin from a customer over the relationship, often average margin per period times expected retention periods. Compare it with acquisition cost to judge unit economics.

RACI matrix

A responsibility chart assigning Responsible, Accountable, Consulted, and Informed roles per deliverable. Exactly one person should be Accountable to prevent decision stalls.

Psychological safety

A shared belief that the team is safe for interpersonal risk-taking, such as admitting errors or asking questions. It predicts learning and error reporting better than individual expertise.

Groupthink

A deterioration of group judgment caused by pressure for unanimity. Symptoms include self-censorship and illusion of unanimity; devil's advocates and anonymous input reduce it.

Thomas-Kilmann modes

Five conflict-handling styles: competing, collaborating, compromising, avoiding, and accommodating. Collaborating seeks a win-win and requires both high assertiveness and high cooperativeness.

Social loafing

The tendency for individuals to exert less effort in a group than alone. It increases with team size and falls when individual contributions are identifiable and evaluated.

Consent decision rule

A decision is made when no participant has a principled objection, even if not everyone prefers it. It moves teams faster than unanimity while preserving voice.

Effective feedback

Feedback that is specific, timely, and behavior-focused, paired with a forward-looking request. General praise or criticism does not change behavior because it gives no actionable target.

Structural conflict

Conflict rooted in organizational design, such as unclear decision rights or misaligned metrics, rather than personality. It is addressed by clarifying roles and shared goals.

Stakeholder mapping

Plotting stakeholders by influence and interest to choose engagement approach. High-influence, high-interest parties need close partnership; low-interest parties need only monitoring.

Net present value

The sum of expected cash flows discounted at the cost of capital, minus initial investment. A positive NPV means the project adds value and should be accepted.

Internal rate of return

The discount rate that makes a project's NPV equal to zero. It can mislead when comparing projects of different scale or timing, so pair it with NPV.

Weighted average cost of capital

The blended after-tax cost of debt and equity, weighted by market value proportions. It is the hurdle rate for investments of average risk.

Capital asset pricing model

Cost of equity equals the risk-free rate plus beta times the market risk premium. Beta measures the stock's sensitivity to market movements.

Modigliani-Miller theorem

Without taxes, capital structure does not affect firm value. With taxes, debt adds a tax shield worth the tax rate times debt, raising value.

Economic value added

Invested capital times the spread between return on invested capital and WACC. Positive EVA indicates the firm earns more than its cost of capital.

Payback period

The time required to recover an initial investment from cash inflows. It ignores cash flows after the cutoff and the time value of money, so use it only as a screen.

Hedging

Taking an offsetting position to reduce exposure to price, rate, or currency movements. It lowers cash-flow volatility but creates value only by reducing taxes, distress, or agency costs.

Scenario planning

Constructing several plausible futures rather than a single forecast. The aim is a strategy robust across scenarios, not a prediction of the most likely one.

Adoption life cycle

The sequence of innovators, early adopters, early majority, late majority, and laggards. The gap between early adopters and early majority is called the chasm.

Leading indicator

A metric that moves before the outcome it predicts, such as pipeline for future revenue. Lagging indicators confirm results after the fact; leading ones support proactive action.

PESTLE analysis

A scan of political, economic, social, technological, legal, and environmental forces. It structures external environment analysis for strategy and risk planning.

Disruptive innovation

Innovation that starts at the low end or in new markets with cheaper, initially inferior offerings, then improves until it displaces incumbents. Incumbents often ignore it as unprofitable.

Real options

The value of flexibility to defer, expand, or abandon an investment. Staged commitments can be worth more than a single large bet because they limit downside.