Benchmarking Can Only Be as Good as the Relevance of the Measures

question 36

Multiple Choice

Benchmarking can only be as good as the relevance of the measures that are used.Which of the following is a determinant of the measures that should be used?

• A)Measures must be done quickly and accurately.
• B)Measure only what it is convenient to measure.
• C)What are being compared must be comparable in some useful sense.
• D)The entities being measured must be compared to those of competitors.

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Definitions:

Contribution Margin

The difference between a company's sales revenue and its variable costs, indicating how much revenue contributes to covering fixed costs.

Net Income

The total profit of a company after all expenses, including taxes and operating costs, have been subtracted from total revenues.

Operating Leverage

A measure of how revenue growth translates into growth in operating income, indicating the proportion of fixed versus variable costs a company has.

Degree of Operating Leverage

A financial ratio that measures the sensitivity of a company's earnings before interest and taxes (EBIT) to a percentage change in sales, indicating the impact of fixed costs on profits.