Chapter 1 Key Terms

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40 terms

Benchmarking

A study of organizations that are among the best in the world at performing a particular task.

Budget

A detailed plan for the future, usually expressed in formal quantitative terms.

Business process

A series of steps that are followed in order to carry out some task in a business.

Chief Financial Officer

The member of the top management team who is responsible for providing timely and relevant data to support planning and control activities and for preparing financial statements for external users. An effective CFO is a key member of the top management team whose advice is sought in all major decisions.

Constraint

Anything that prevents an organization or individual from getting more of what it wants.

Control

The process of instituting procedures and then obtaining feedback to ensure that all parts of the organization are functioning effectively and moving toward overall company goals.

Controller

The member of the top management team who is responsible for providing relevant and timely data to managers and for preparing financial statements for external users. The controller reports to the CFO.

Controlling

Ensuring that the plan is actually carried out and is appropriately modified as circumstances change.

Corporate governance

The system by which a company is directed and controlled. If properly implemented it should provide incentives for top management to pursue objectives that are in the interests of the company and it should effectively monitor performance.

Cycle time

See Throughput time.

Decentralization

The delegation of decision-making authority throughout an organization by providing managers at various operating levels with the authority to make key decisions relating to their area of responsibility.

Directing and motivating

Mobilizing people to carry out plans and run routine operations.

Enterprise system

A software system that integrates data from across an organization into a single centralized database that enables all employees to access a common set of data.

Enterprise risk management

A process used by a company to help identify the risks that it faces and to develop responses to those risks that enable the company to be reasonably assured of meeting its goals.

Feedback

Accounting and other reports that help managers monitor performance and focus on problems and/or opportunities that might otherwise go unnoticed.

Financial accounting

The phase of accounting concerned with providing information to stockholders, creditors, and others outside the organization.

Finished goods

Units of product that have been completed but have not yet been sold to customers.

Just-In-Time JIT

A production and inventory control system in which materials are purchased and units are produced only as needed to meet actual customer demand.

Lean thinking model

A five-step management approach that organizes resources around the flow of business processes and that pulls units through these processes in response to customer orders.

Line

A position in an organization that is directly related to the achievement of the organization's basic objectives.

Managerial accounting

The phase of accounting concerned with providing information to managers for use in planning and controlling operations and in decision making.

Non-value-added activity

An activity that consumes resources or takes time but that does not add value for which customers are willing to pay.

Organization chart

A visual diagram of a company's organizational structure that depicts formal lines of reporting, communication, and responsibility between managers.

Performance report

A detailed report comparing budgeted data to actual data.

Planning

Selecting a course of action and specifying how the action will be implemented.

Planning and control cycle

The flow of management activities through planning, directing and motivating, and controlling, and then back to planning again.

Process Reengineering

An approach to improvement that involves completely redesigning business processes in order to eliminate unnecessary steps, reduce errors, and reduce costs.

Raw materials

Materials that are used to make a product.

Sarbanes-Oxley Act of 2002

Legislation enacted to protect the interests of stockholders who invest in publicly traded companies by improving the reliability and accuracy of the disclosures provided to them.

Segment

Any part of an organization that can be evaluated independently of other parts and about which the manager seeks financial data. Examples include a product line, a sales territory, a division, or a department.

Setup

Activities that must be performed whenever production is switched over from making one type of item to another.

Six Sigma

A method that relies on customer feedback and objective data gathering and analysis techniques to drive process improvement.

Staff

A position in an organization that is only indirectly related to the achievement of the organization's basic objectives. Such positions provide service or assistance to line positions or to other staff positions.

Strategy

A "game plan" that enables a company to attract customers by distinguishing itself from competitors.

Supply chain management

A management approach that coordinates business processes across companies to better serve end consumers.

Theory of Constraints TOC

A management approach that emphasizes the importance of managing constraints.

Throughput time

The time required to manufacture a unit of product. Throughput time is also known as cycle time.

Total Quality Management TQM

An approach to continuous improvement that focuses on customers and using teams of front-line workers to systematically identify and solve problems.

Value chain

The major business functions that add value to a company's products and services such as research and development, product design, manufacturing, marketing, distribution, and customer service.

Work in process

Units of product that are only partially complete and will require further work before they are ready for sale to a customer.

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