Glossary of Terms
A
Accounts Payable:
Payments owed by a business to its vendors or suppliers for goods and services purchased.
Accounts Receivable:
Payments owed to a business by its customers for goods and services purchased.
Accounts Receivable Collection Period:
The average amount of time it takes to collect the money owed to a business from its
customers.
Accrued Expenses:
Expenses that accumulate at regular intervals, such as each day, but which will be paid at a
future date.
Accumulated Depreciation:
The cumulative amount of depreciation for the assets listed under property, plant, and
equipment (PPE).
Asset Intensity:
The amount of assets required to generate an organization’s income.
Assets:
The items on a balance sheet showing the value of the property an organization owns that
are expected to be used to generate future income.
B
Balance Sheet:
A written statement of the financial condition of an organization at a specific point in time
and specifying all of the organization’s assets and liabilities.
Balanced Scorecard Movement:
A management strategy pioneered by Robert Kaplan and David Norton designed to give a
complete picture of an organization by focusing on finances, customers, internal processes,
and learning and growth.
Base Driver:
A more detailed, lower-level performance measure on a financial value chain that is used to
explain the movement in a higher, more broad financial measure.
Benchmarking:
The practice of comparing one’s own processes or services against the best practices of
other highly regarded organizations with the goal of learning what others do that can be
transferred into improving the processes of one’s own organization.
Benefit-to-Cost Ratio:
A ratio that shows how many dollars (or other monetary unit) of benefit were created for
every one dollar of cost spent. Benefit-to-cost ratio is calculated by dividing the total gross
benefits by the total costs of an intervention.
Bottom Line:
Gross sales minus cost of goods sold/cost of services, other sales-driven expenses, fixed
expenses, taxes, interest, depreciation, and other one-time or special expenses. Also called
net profit (or loss).
C
Calendar Year:
A 12-month period beginning on January 1 and ending on December 31. May or may not
correspond with the fiscal year.
Capital:
Funds, or other forms of assets and liabilities, used to generate income for an organization.
Cash:
An asset of an organization that is held in the form of coins, currency, checks, or money
orders or the amount representing these items held in a bank account.
Cash Flow Statement:
A statement specifying sources and uses of cash over a particular period of time.
Change Management:
A proactive, systematic, and planned approach to changing an organization so that it will
achieve its organizational vision and goals, with minimal disruption to the individuals within
the organization and to the organization as a whole.
Contribution Profit Margin:
Equals the sales revenue minus cost of goods sold (COGS), revenue-driven expenses, and
volume-driven expenses.
Contribution Profit Margin Ratio:
Ratio of contribution profit margin to sales revenue.
Cost of Capital:
The finance charges, or the cost of borrowing funds, to pay for an investment in a major new
project for a business or to pay for other seasonal or extraordinary items.
Cost of Goods Sold (COGS):
The sum of material costs, labor costs, and direct overhead costs.
Cost per Order Dollar (CPOD):
Gross sales divided by sales-driven expenses. Provides a way to track if sales-driven
expenses are dropping, holding steady, or rising to obtain the same level of gross revenue
from customer orders.
Current Assets:
Assets that will be converted to cash within 1 year.
Current Liabilities:
Liabilities that will paid within 1 year.
Current Ratio:
Current assets divided by current liabilities.
D
Days Inventory Supply:
The average number of days inventory is held before it is sold.
Depreciation:
The process of expensing the cost of a fixed asset over a useful life. The amount of the asset
expensed is determined using one of several defined depreciation methods.
E
Earnings Before Income Taxes:
Net sales (or revenue) minus all expenses except income taxes, specifically COGS, other
revenue-driven expenses, fixed operating expenses, and interest expenses.
Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA):
Calculated by looking at earnings after COGS, other sales-driven expenses, and fixed
operating expenses have been removed from revenue, but before interest, taxes,
depreciation, and amortization are taken into account.
Effectiveness:
Creating new or additional impact on an organization’s financial measures or financial
statements such that the impact makes a significant or sizable difference to the success of
the organization.
Efficiency:
Delivering the same level of benefit as before but at a lower intervention cost.
F
Financial Imperatives Scorecard:
A format for tracking the benefits and costs of workplace learning and prevention
interventions.
Financial Metrics or Measures:
Measures of value that are based strictly on financial or monetary considerations, such as
COGS.
Financial Ratios:
Measures describing whether an organization is making enough return for its efforts. Ratios
describe balance.
Financial Statements:
Written statements detailing an organization’s finances, including balance sheets, income
statements, and cash flow statements. Together these statements give a presentation of the
organization’s financial condition for a specific time period.
Financial Value:
The worth of a workplace learning and performance intervention as expressed in financial
terms.
Financial Value Chain:
A cascading, linked set of measures where the leftmost measure is a broad, financially based
measure of a Senior executive and the rightmost measure is a specific, performance-based
measure of an Individual contributor.
Financial Value Process:
A process for connecting the merit or value of a workplace learning and performance
intervention directly to the financial measures and goals of an organization.
Financing Activities:
A section on the cash flow statement that displays all of the changes in cash flow caused by
management’s decisions to obtain or pay back debt. Transactions with owner’s equity, such
as issuing or purchasing stock, also go in this section of the cash flow statement.
Fiscal Year:
A 12-month accounting period adopted by an organization starting on the first day of a
specified month and ending on the last day of the twelfth month. May or may not
correspond with the calendar year.
Fixed Operating Expenses:
Expenses that are incurred regardless of the level of production. An example would be the
cost to pay a monthly lease on a building that houses a production plant. The monthly lease
must be paid, even if the plant is shut down and not producing anything. Also referred to as
fixed expenses.
G
Generally Accepted Accounting Principles (GAAP):
In the United States, the Financial Accounting Standards Board (FASB) issues and regularly
updates a huge set of statements that define acceptable accounting practices.
Gross Profit:
Net sales minus COGS.
H
Hoshin Process:
A strategy based on identifying vital key issues in an organization and focusing on these
issues at all levels of the organization.
Human Performance Technology (HPT):
A methodology that uses performance analysis, cause analysis, and intervention selection
for solving problems or enabling new opportunities based on the improved performance of
people. People may be classified in any combination of individuals, small groups, or large
organizations.
I
Income Statement:
A written financial statement showing details of revenues, costs, expenses, losses, and
profits for a specific time period.
Indicators:
Measures where changes could imply that an intervention is or is not having the desired
effect on the workplace. For example, if the goal of a stress management program is to
reduce errors as a result of reduced stress, then a reduction in the error rate may mean that
stress has indeed been reduced.
Intervention:
A systematic, planned response to an identified gap between current performance and
desired performance. Can take many forms depending on the business conditions and
allowable time frame for implementation. Also commonly referred to as programs,
solutions, or strategies in workplace learning and performance literature.
Inventory:
The monetary value of the product a company has on hand but has not yet sold in the normal
course of operating its business. Inventory may be referred to by its various states, such as
raw materials, work in process, or finished goods.
Investing Activities:
A section on the cash flow statement that displays all of the changes in cash flow caused by
investments made by the management of the organization. A common investment is the
purchase of new property, plant, or equipment (PPE).
J
Just-in-Time (JIT) Inventory Management:
A strategy in which raw materials and components that meet pre-specified quality levels are
produced, or delivered from a supplier, immediately before they are needed in the
manufacturing process. The underlying goal is to reduce waste from several areas of the
production process such as waste from overproduction, transportation, processing methods,
production defects, or production waiting or idle time.
K
Kano Model of Product Quality:
A theory developed by Noriaki Kano describing levels of value perception.
L
Leverage:
The amount of debt or borrowed money an organization is using to fund its operations.
Leverage is not good or bad. If it is used wisely, it can have tax advantages or other
beneficial impacts. Organizations that are highly leveraged (that is, carrying too much debt
versus their assets) may be at great risk if any adverse business conditions arise that would
cause them to be unable to pay their expenses. They may not be able to get any additional
loans in an emergency. Such organizations may be forced into bankruptcy or driven out of
business.
Leverage Ratio:
Total liabilities divided by owner’s equity.
Liabilities:
Debts and other financial obligations that an organization has at a particular point in time.
Liquidity:
A measure of the ease that a non-cash asset (such as real estate) can be converted into cash
assets.
Liquidity Ratio:
See quick ratio.
Long-Term Assets:
Assets that will be held by an organization for more than 1 year from the date of the balance
sheet.
Long-Term Liabilities:
Liabilities that will come due for an organization more than 1 year from the date of the
balance sheet.
M
Managing Position:
Maintaining the appropriate mix of the assets, liabilities, and owner’s equity of the
organization.
Market:
A defined group of buying customers. Examples are: Eastern European small business
owners, adults over age 50 in the United States, worldwide automobile consumers.
Market Share:
The percentage of sales for a type of product or service, made to a specific market, by a
given company. For example, if Company X sold 15 percent of all scuba diving gear to
consumers in Florida, Company X would have a 15 percent market share for this type of
product, in this market.
Material Costs:
Also known as direct materials. Direct materials are all materials that become a part of the
finished product of a manufacturing operation.
Measures:
See Financial Metrics or Measures; Performance Metrics or Measures.
Metrics:
See Financial Metrics or Measures; Performance Metrics or Measures.
N
Net Profit (or Loss):
Gross sales minus cost of goods sold/cost of services, other sales-driven expenses, fixed
expenses, taxes, interest, depreciation, and other one-time or special expenses. This is the
proverbial bottom line.
O
Operating Activities:
A section on the cash flow statement that displays all of the changes in cash flow caused by
the normal day-to-day operation of the business. Increases or decreases in accounts
receivable would be an example of changes from an operating activity.
Operating Earnings:
Contribution profit margin minus fixed expenses.
Operating Expenses:
See Fixed Operating Expenses.
Operating Margin:
The percentage difference between gross revenue (R) and operating costs (C), or
.
Operating Ratios:
Measures of the relationships and balance between revenue and expenses and their
corresponding assets and liabilities.
Organizational Chain:
The management structure of an organization expressed in broad layers or terms.
Overhead:
Costs that are not directly attributable to a specific product.
Owner’s Equity:
Total assets minus total liabilities.
P
Penetration:
The total number of intervention attendees or intervention participants who successfully
applied the intervention on the job.
Performance Metrics or Measures:
Measures of value that are based on an individual or organization’s performance, for
example, an outstanding appraisal or the number of individuals trained in a particular area.
Position:
The financial condition of an organization. Positions can be fairly secure (healthy) or highly
at risk (unhealthy) due to situations such as too much liabilities versus assets.
Prepaid Expenses:
Expenses that must be paid for before they are used.
Profit:
The amount of revenue or gain left over for a business after all expenses have been
subtracted from revenue. Always a positive number. (The opposite of loss, which is always
a negative number.)
Profit and Loss Statement:
Another name for income statement.
Profit Line:
One of several lines in an income statement detailing contribution profit margin, operating
earnings, earnings before income tax, or net profit (or loss).
Profit Ratio:
The ratio of one of the profit lines to the net sales (revenue).
Q
Quick Ratio:
Total amount of current assets less inventory, divided by current liabilities.
R
Ratio:
The result of dividing one value by another. In financial terms, ratios are indicators of the
amount of balance between different factors. Examples include the amount of assets versus
liabilities or the amount of a line of profit versus revenue.
Return-on-Assets (ROA):
Net income divided by net operating assets, expressed as a percentage.
Return-on-Equity (ROE):
Net income divided by owner’s equity, expressed as a percentage.
Return-on-Investment (ROI):
Net return divided by investment, expressed as a percentage. The return may refer to
earnings, income, profit, gain, or appreciation in value. Investment means the amount of
capital used to generate the return. Frequently refers to the return gained and the investment
made in a 1-year period. Specifically, ROI equals
, where R is the total
return and I is the total investment cost.
Rework Rate:
Percentage of goods or actions that are defective or of low quality that they must have
additional work added to them before they can be sold or accepted.
S
Sales Mix:
The balance of products and services sold as related to their price and volume.
Seasonality:
The naturally occurring cycles of variations in sales levels or other measures during the
course of the year.
Shareholder’s Equity:
The equivalent of owner’s equity in a corporation.
Source and Application of Funds:
Another name for cash flow statement.
Speed:
How quickly the benefits of the intervention can be obtained.
Statement of Operations:
Another name for income statement.
Statement of Utilization of Funds:
Another name for cash flow statement.
Succession Plans:
Plans created within an organization to identify and then develop one or more potential
successors for key positions within the organization.
Sustainability:
The length of time participants who apply the WLP intervention continue to do so.
T
Total Quality Management:
An organizational management approach to managing the process, culture, innovation cycle,
and customer satisfaction goals of an organization through a focus on continuous
improvements in quality and value.
V
Value:
The relative worth, importance, utility, or degree of excellence of something or someone.
Value Add:
A column on the financial imperatives scorecard describing the amount of financial change
an intervention has, or is expected to create for an organization.
Value Communication:
Clearly and succinctly describing the value of your interventions in terms of the measures
that your audience is judged by.
Value Connection:
The connection between the employee’s contribution and its benefit to his or her target
audience.
Value Lifecycle:
A set of urgent and important activities corresponding to the annual budget and planning
cycle, product development cycle, or seasonal sales cycle of an organization.
Value Statement:
A concise description of value that translates performance improvement into financial
improvement relevant to the listener’s current priorities. The value is linked to a goal that
the person making the statement would like to achieve next to add even more value to an
organization.
Value Theme:
A statement of a specific intervention to an organizational problem or an activity that will
have a positive effect on a financial measure, in terms of how and why that problem or
measure will be affected.
W
White Paper:
Documents of 10-20 pages that can be read in 30-60 minutes. White papers summarize the
position, approach, framework, issues, strategies, trends, and/or conclusions about a
particular topic from the group producing the white paper. White papers may be produced
internally to an organization and remain confidential or may be publicly distributed by
government agencies, special interest groups, marketing organizations, technology groups,
or research committees.
Workplace Learning and Performance (WLP):
Professional activity focused on improving productivity in the workplace through learning,
training, or other performance improvement processes, programs, and interventions.