Carefully review your Balanced Scorecard Results.. Then drill-down on your company's Balanced Scorecard to show all of the detail.

1. What is the most useful item on the Balanced Scorecard? Why?
2. Will the Balanced Scorecard results influence this quarter's decisions. Why?
3. Do you believe the Balanced Scorecard is an effective method to summarize the overall performance of a company? Why or why not?

nbox (7) - c x Topic: Week X Peregrine A X 49 Quiz: Quiz z X Balanced Sc X * Course Her X The Ultimat por Ultimate-H( X G There are t X a Balance S C n File | C:/Users/Cesar%20G/Documents/Berkeley%20College/3.%20Management%20Simulation/Balance%20Scorecard.pdf O rd CANVAS M Inbox - cg2204692... > ADP YouTube VA VA.gov Home | Vete... C VA/DoD eBenefits VA My Healthevet ClickPay Verizon: Wireless, In... Berkeley College Con Ed of 7 Q | Page view A Read aloud | Add text | V Draw Highlight Erase Balanced Scorecard Chi-Tech Quarter 4 Total Performance = Financial Performance * Market Performance * Marketing Effectiveness * Investment In Future * Wealth * Human Resource Management * Asset Management * Manufacturing Productivity * Financial Risk Industry Results for Quarter 3 Minimum Maximum Average Chi-Tech = 10.245 + 0.075* 0.648 * 3,363 * 0.798 * 0.720 * 0.315 * 0.482 * 1,000 Total Performance 0.097 24.812 6.070 0.146 0.146 Financial Performance 2.271 55.165 20.162 10.245 Financial Performance: 10.245 Market Performance 0.075 0.292 0.155 0.075 Market Performance: 0.075 Marketing Effectiveness 0.608 0.715 0.663 0.648 Marketing Effectiveness: 0.648 Investment in Future 2.434 6.718 3.830 3.363 Investment in Future: 3.363 Wealth 0.694 1.158 0.879 0.798 Wealth: 0.798 Human Resource Management 0.636 0.723 0.705 0.720 Human Resource Management: 0.720 Asset Management 0.298 1.097 0.592 0.315 Asset Management: 0.315 Manufacturing Productivity. 0.482 Manufacturing Productivity 0.482 1.000 0.896 0.482 Financial Risk: 1.000 Financial Risk 1.000 1.000 1.000 1.000 Financial Performance Total Performance measures how well the executive team has been able to create profits for its shareholders. A positive number The Total Business Perform ace indicator is a quantitative measure of the executive team's ability to is always desired and the larger the better. It is computed in three steps. effectively manage the resources of the firm. It considers both the historical performance of the firm as well as how well the firm is posit easures the action potential of the First, a measure of the company's profitability is computed by taking the average of your gross profit and your firm. net profit from operations. The index employs what is called a balanced scorecard to measure the executive team's performance. The The gross profit is the company's revenue minus the costs of making your products. It is computed most important measure is the team's financial performance, and thus its ability to create wealth for the subtracting rebates and the cost of the goods sold from total revenues. Gross profit measures how efficiently investors. However, the focus on current profits has caused many executives to stress the present at the you produce revenue. expense of the future. The net profit from operations is computed by taking the opera g profit shown in the income statement and The long-term viability of the firm requires that the executive team be good at managing not only the firm's adding back investments in the future that Tent quarter. It measures how well the profitability, but also its marketing activities, production operations, human resources, cash, and financial managers are able to create revenue from s and manufacturing resources. The management te ture. These expenses might depress the current activities. financial performance, but are vital to creating new products, markets, and manufacturing capabilities. Note that the income statement also includes investments that will benefit your firm's future (referred to as In short, top managers must be good at managing all aspects of the firm. The balanced scorecard puts this Investment in Future' in the bala orecard). Because these expenses will help you to create new perspective into practice. It focuses attention on multiple performance measures, and thus multiple decision business opportunities, they are a perating profit so that the financial performance areas. None can be ignored or downplayed. The best managers will be strong in all areas measured measure is entirely focused on current quarter revenues and expenses. sure is computed by multiplying several indicators of business Second, the total number of shares of stock is computed by adding all forms of equity investment. If an The Total Business Performance m performance. This model underscores the importance of all measures. This is because any strength or emergency loan has been taken out, shares of stock will automatically be issued to the loan shark and they weakness will have multiple effects on the final outcome, the Action Potential of the Firm. become a permanent part of the equity financing. The following is a summary of the measure of the firm's Total Business Performance and its key Third, the average of your gross profit and your net profit from current operations is divided by the number of shares of stock issued to determine the profitability per share of stock performance indicators. The computational details follow. Note that a negative score in any of these indicators will result in a Total Performance of '0". Financial Performance = (Net Profit from Current Operations + Gross Profit ) / 2 / Total Shares Issued Primary Segment: Mercedes = (75,361 + 744,271 ) / 2/ 40,000 Secondary Segment: Workhorse = 10.25 77 WM Inbox (7) - c X Topic: Week X Peregrine A X Quiz: Quiz z X Balanced Sc X * Course Her X The Ultimatxo Ultimate-H X G There are tl X DE Balance Scc X CA File | C:/Users/Cesar%%20G/Documents/Berkeley%20College/3.%20Management%20Simulation/Balance%20Scorecard.pdf O T ashboard CANVAS M Inbox - cg2204692... > ADP YouTube VA VA.gov Home | Vete... K VA/DOD eBenefits VA My Healthevet ClickPay Verizon: Wireless, In.. Berkeley College Con Edison 3 of 7 Q + Page view | A Read aloud T Add text | V Draw Highlight Erase Net Profit from Current Operations is a measure of how well the managers ha en able to satisfy the the customers as measured by Operating Profit + Investments in Firm's Future = -34,639 + 110,000 = 75,361 the quality of their bran ds in its primary and Operating Profit secondary segments are used to measu ion. The two s hen averaged to obtain = Gross Profit - Total Expenses = 744,271 - 778,911 = -34,639 the Indicator for marketing effectiven he score ranges from 0 to 1.0. A good score would be greater Gross Profit: 744,271 than 0.8. Total Expenses: 778,911 Investments in Firm's Future Marketing Effectiveness = ( Average Brand Judgment / 100 + Average Ad Judgment / 100) / 2 Cost to Open New Sales Offices + R&D Investment in New Brand Features and New Brands + Depreciation = 0 + 60,000 + 50,000 = 110,000 = (63 / 100+ 67 / 100) / 2 Cost to Open New Sales Offices: 0 : 0.65 R&D Investment in New Brand Features and New Brands: 60,000 Depreciation: 50,000 Average Brand Judgment Gross Profit: 744,271 = (Highest Brand Judgment in Primary Segment + Highest Brand Judgment in Secondary Segment ) / 2 = ( Total Shares Issued 60+ 65) / 2 =63 = Number of Shares Issued to Executive Team + Number of Shares Issued to Venture Capitalists + Number Highest Brand Judgment in Primary Segment: 60 of Shares Issued to Loan Shark = 40,000 + 0 + 0 = 40,000 Highest Brand Judgment in Secondary Segment: 65 Number of Shares Issued to Executive Team: 40,000 Average Ad Judgment Number of Shares Issued to Venture Capitalists: 0 = ( Highest Ad Judgment in Primary Segment + Highest Ad Judgment in econdary Segment ) / 2 = (66+ Number of Shares Issued to Loan Shark: 0 58) /2 = 67 Highest Ad Judgment in Primary Segment: 66 Highest Ad Judgment in Secondary Segment: 68 Market Performance is a measure of how well the managers are able to cre secondary segments. Investment in Future The firm's market share in two target segme its is used to measure this demand creation ability. The market share score is adjusted down underscore reflects the willingness of the executive team to s hues on future business opportunities. two points. First, unnecessary resources have enerate more demand than can be satisfied. They are necessary but risky. In the short-term, these expenditures can cause large negative profits on the Second, ill will has been created by having potential customers become frustrated when they do not find the income statement. As a result, the retain tive, thus indicating that a products that they have been persuaded to buy. The score ranges from 0 to 1.0 and will depend upon the substantial portion of the stockholder's inv ment has disappeared into the oper ations of the firm. In the number of competitors. If there are 3 firms, a good score would be greater than 0.5. If there are 8 teams, a long-term, these investm if the firm is to be competitive. Thus, there is a need good score would be greater than 0.35. to balance the loss of stockholder's equity again set investments which could create even greater returns for the investors in the future. The score is always greater or equal to 1.0 and a good score would be greater Market Performance = Average Market Share in Targeted Segments / 100 * Percent of Demand Actually than 3.0. Served / 100 Investment in Future = ( Cumulative Expenses that Benefit Firm's Future / Cumulative Net Revenues ) * 10+ = 8 / 100 * 100 / 100 = 0.08 = (495,000 / 2,094,450 ) + 10+1 =3.36 Average Market Share in Targeted Segments = { Market Share in Primary Segment + Market Share in Secondary Segment ) / 2 = ( 12 + 3) / 2 = 8 Market Share in Primary Segment: 12 Cumulative Expenses that Benefit Firm's Future Market Share in Secondary Segment: 3 = Cumulative Cost to Open New Sales Offices + Cumulative R&D Investment in New Brand Features and Percent of Demand Actually Served New Brands + Cumulative Depreciation = 180,000 + 240,000 + 75,000 = 495,000 = ( ( Total Net Demand - Number of Stock-outs ) / Total Net Demand ) * 100 = ( (338 -0 ) / 338) - 100 = Cumulative Cost to Open New Sales Offices: 180,000 100 Cumulative R&D Investment in New Brand Features and New Brands: 240,000 Cumulative Depreciation: 75,000 Total Net Demand: 338 Number of Stock-outs: 0 Cumulative Net Revenues Cumulative Sales Revenue - Cumulative Rebates = 2,107,500 - 13,050 = 2,094,450 Cumulative Sales Revenue: 2107,500 Marketing Effectiveness Cumulative Rebates: 13,050 77' WM Inbox (7) - c X Topic: Week X Peregrine A X Quiz: Quiz z X Balanced Sc x * Course Her X The Ultimatxo Ultimate-HI X G There are tl X DE Balance Sco @ File | C:/Users/Cesar%20G/Documents/Berkeley%20College/3.%20Management%20Simulation/Balance%20Scorecard.pdf To Dashboard CANVAS M Inbox - cg2204692... 4 ADP YouTube VA VA.gov Home | Vete... SE VA/DoD eBenefits VA My Healthevet ClickPay Verizon: Wireless, In. Berkeley College Con Ediso 5 of 7 Q + Page view | A Read aloud T Add text V Draw Highlight Erase use the assets to create sales which are two or three times the value of the assets. Thus, a very good score Wealth would be 3.0. In addition to asset turnover, ending in and included. To avoid stock-outs, and is a measure of how well the executive team has been able to add wealth to the initial investments of the stockholders. During the start-up phase of the company, it is expected that the initial stockholders' their associated penalties, manager inventory. To discourage large ending inventories, there is a per an is needed to meet demand. The investments will be used to create new brands and conduct R&D on new brand features. Expenses can exceed revenues leading to losses and retained earnings figures that are negative. penalty increases as the proportion of ending inventory Note that a negative penalty for excess in Asset Management of "0". To compute the creation of wealth measure, the net equity of the firm is first computed by adding the retained earnings to the total of the investments from all of the stockholders. The retained earnings figure is Asset Management = Asset Turnover * Penalty for Excess Inventory the sum of all profits from the inception of the firm. As noted above, the retained earnings will be negative in the early quarters as the firm invests money to start up and grow the business. = 0.42 + 0.74 he =0.31 Next, the net equity is divided by the total of all equity investments to obtain a ratio of wealth creation. A value of zero or less indicates bankruptcy. A value greater than zero and less than one indicates the executive team is relying upon the Initial stockholder's investments to pay day-to-day expenses plus Invest in Asset Turnover the future. A value greater than one indicates the firm is adding wealth to the stockholders. Net Revenues / Total Assets = 1,349,100 / 3,192,095 = 0.42 Net Revenues Wealth = Net Equity / Total Stockholders Equity = Sales Revenue - Rebates + Interest Income = 1,348,500 - 5,700 + 6,300 = 1,349,100 Sales Revenue: 1,348,500 = 3,192,095 / 4,000,000 Rebates: 5,700 0.80 Interest Income: 6,300 Total Assets: 3,192,095 Net Equity Penalty for Excess Inventory Retained Earnings + Common Stock =-807,905 + 4,000,000 = 3,192,095 = 1 - Ending Inventory / Production = 1-80 / 313 = 0.74 Retained Earnings: -807,905 Ending Inventory: 80 Common Stock: 4,000,000 Production: 313 Total Stockholders Equity Common Stock = 4,000,000 = 4,000,000 Manufacturing Productivity Common Stock: 4,000,000 measures how much of the operating capacity is actually used in production versus that portion lost to Human Resource Management excess capacity. Excess capacity costs occur when the production facility is scheduled to produce more units than is needed to meet demand or stock the warehouse. Good forecasting and production scheduling is a measure of how well the executive team is able to recruit the best employees, satisfy their needs, and will reduce penalties for excess capacity. motivate them to excel. High performance is only possible if the firm's compensation packages is The score ranges from 0.0 to 1.0. A very good score would be 0.80. competitive and in tune with what is important to employees over time. The scores range from zero to 1.00 and a good score would be greater than'0.85. Manufacturing Productivity = ( Percent of Operating Capacity Used in Production / 100) Human Resource Management = Sales Force Productivity / 100 ( 48 / 100) - 0.48- = 72 / 100 = 0.72 Percent of Operating Capacity Used in Production: 48 Sales Force Productivity: 72 Financial Risk Asset Management measures the executive team's ability to manage debt as a financial resource. The financial risk indicator is based upon the degree to which debt is part of the capital of the firm. As debt increases relative to the total is a measure of the executive team's ability to use the firm's assets to create sales revenue. The first step in measuring asset management is to compute the asset turnover of the firm. Effective managers are able to Wcapital, then the financial risk associated with the company increases. Conversely, as the proportion of equity in the total capital increases, then the perceived financial risk in the firm decreases. To compute financial risk, the proportion of equity is obtained by computing the amount of equity In the firm and dividing it by the amount of capital invested in theyfirm from all sources. Specifically, the amount of equity is equal to the sum of common stock plus retained earnings. The amount of capital is equal to the sum of debt plus common stock plus retained earnings. As the ratio of equity to capital decreases (meaning more debt), then financial risk increases. A value of 1.00 would indicate there is no debt and, therefore, no perceived financial risk. It is important to realize that financial managers do not want to totally discourage debt. The optimum capital structure will vary by firm depending on its tax situation, overall risk, asset base, and financial slack. Some debt may be desirable in order to help the firm take advantage of value enhancing business opportunities (le., opportunities that earn more than the company's weighted average cost of capital). In order to mitigate or downplay the effect of low amounts of debt in the capital structure, the value for the share of equity in the company is raised to a power of 0.5 (square root). Thus, if debt represented 20% of the capital structure, then the Financial risk indicator would be 0.89 (0.80 * 0.5). If debt were 50% of the capital structure, the Financial Risk indicator would be 0.71, A Financial Risk indicator below 0.80 (more than 36% debt) would be considered unfavorable. Financial Risk = ( Total Equity / Total Capital ) + 0.5 ( 3,192,095 / 3,192,095 ) * 0.5 = 1.00 Total Equity Common Stock + Retained Earnings = 4,000,000 + -807,905 = 3,192,095 Common Stock: 4,000,000 Retained Earnings: -807,905 Total Capital = Common Stock + Retained Earnings + Debt - 4,000,000 + -807,905 + 0 = 3,192,095 Common Stock: 4,000,000 Retained Earnings. -807,905 Debt: 0 HOLU