Chapter 7, Problem 1MCQ

What would you consider to be Financial Performance KPIs?

1. a. Total Shareholder Return
2. b. Customer Profitability Score
3. c. Market Growth Rate
4. d. Klout Score

To determine

Identify the items which would be considered as Financial Performance KPIs.

Answer to Problem 1MCQ

Option a.

Explanation of Solution

Key Performance Indicator (KPI): This is a specific type of performance metric that helps managers in keeping track of performance and strategic objectives and is an important factor that impacts the strategy and decision making. Organizations use these KPI data for evaluating the performance of the employees. KPI determination depends on particular strategy that is unique for each organization.

Financial Performance KPIs: The financial performance KPIs are as follows:

1	Net Profit
2	Net Profit Margin
3	Gross Profit Margin
4	Operating Profit Margin
5	EBITDA
6	Revenue Growth Rate
7	Total Shareholder Return (TSR)
8	Economic Value Added (EVA)
9	Return on Investment (ROI)
10	Return on Capital Employed (ROCE)
11	Return on Assets (ROA)
12	Return on Equity (ROE)
13	Debt-to-Equity (D/E) Ratio
14	Cash Conversion Cycle (CCC)
15	Working Capital Ratio
16	Operating Expense Ratio (OER)
17	CAPEX to Sales Ratio
18	Price-to-Earnings Ratio (P/E Ratio)

Justification for correct and incorrect answer:

a.

This is the correct choice as the total shareholder is one of the Financial Performance KPIs. This is one of the common indicators of the financial performance of the entity.

b.

This option is an incorrect option because customer profitability score is one of the customer KPIs and not Financial Performance KPIs.

c.

This option is incorrect because the market growth rate is one of the marketing KPIs and not Financial Performance KPIs.

d.

This is an incorrect option because the Klout Score is one of the marketing KPIs and not Financial Performance KPIs.