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What is a key performance indicator?

Short Answer

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Answer

KPI is a quantifiable metric that shows how successfully a corporation is reaching important business objectives.

Step by step solution

01

Meaning of Key performance indicator

An outline performance metric called a key performance indicator (KPI) is employed by directors to decide on the off chance that the association is succeeding in its targets.

02

Explaining a key performance indicator

A quantitative indicator of how successfully a company is completing its core goals is known as a key performance indicator (KPI). Associations use KPIs to measure their progress toward their goals. Low-level KPIs could focus on departmental tasks like sales, marketing, HR, or support, but high-level KPIs might focus on the business’s overall success.

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Most popular questions from this chapter

Consider the following key performance indicators, and classify each indicator according to the balanced scorecard perspective it addresses. Choose from the financial perspective, customer perspective, internal business perspective, and the learning and growth perspective.

a. Number of customer complaints

b. Number of information system upgrades completed

c. Residual income

d. New product development time

e. Employee turnover rate

f. Percentage of products with online help manuals

g. Customer retention

h. Percentage of compensation based on performance

i. Percentage of orders filled each week

j. Gross margin growth

k. Number of new patents

l. Employee satisfaction ratings

m. Manufacturing cycle time (average length of production process)

n. Earnings growth

o. Average machine setup time

p. Number of new customers

q. Employee promotion rate

r. Cash flow from operations

s. Customer satisfaction ratings

t. Machine downtime u. Finished products per day per employee

v. Percentage of employees with access to upgraded system

w. Wait time per order prior to start of production

Question: What is the purpose of a responsibility accounting system?

What is a responsibility center?

Match the responsibility center to the correct responsibility report.

Responsibility Centers

Responsibility Reports

14. Cost center

a. Includes flexible budget variances for revenues and costs.

15. Revenue center

b. Includes flexible budget variances for costs.

16. Profit center

c. Includes flexible budget variances and sales volume variances for revenues.

List the advantages of decentralization.

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