Question

QUESTION 3 Benchmarking is accomplished with a set of performance metrics that are used to study the competitor's best practices in order to include them in your organization strategies. List and describe at least 10 performance metrics used in this process. T Paragraph Arial 3 (120) BI

Answer 1

3. 10 performance metrics and their description:

i. Net working capital – Net working capital is Current assets and current liabilities deployed in business for day to day requirements

ii. Assets turnover ratio- The usage of company assets to generate turnover. The higher the asset turnover it is better

iii. Debt to Total assets ratio- This performance metric indicates the percentage of debt in total assets

iv. Gross profit margin – This metric indicates the gross margin earned in the firm and is a major operational performance metric

v. Operating margin – This ratio indicates the margin after meeting operating costs from gross margin and is widely used operational performance metric

vi. Net profit margin – this ratio indicates the net profit available to equity shareholders after payment of interest and taxes from operating margin

vii. Times interest earned – This key metric indicates the coverage of operating profit for payment of interest expense. The higher the ratio it is better

viii. Average days outstanding – This metric gives the number of days the customer dues are outstanding. The lower the days the good is the metric

ix. Average days on hand- This metric gives the number of days the inventory is on hand. The lower the inventory on hand it is better

x. Return on Equity – This metric gives the return on equity. The higher the return it is better or the firm and its shareholders.

Useful life (years) II Straight Line Depreciation Schedule Asset Depreciable Date / Cost cost Year 1 $200,000 Year 1 $180,000/ Year 2 $180,000/ Year 3 $180,000/ Year 4 $180,000/ Year 5 $180,000/ 5 5 5 5 Depreciation Accumulated Book Expense Depreciation value $200,000 $36,000 $36,000 $164,000 $36,000 $72,000 $128,000 $36,000 $108,000 $92,000 $36,000 $144,000 $56,000 $36,000 $180,000 $20,000 5 Depreciation per year = (Cost of machine - Salvage value )/Life of Asset