Business Performance Management Key Performance Indicators and Metrics 1 — Questions and Answers
Question 1: Which type of KPI measures outcomes that have already occurred and cannot be changed?
- Leading indicator
- Lagging indicator (Correct answer)
- Process indicator
- Input indicator
Correct answer: Lagging indicator
Lagging indicators reflect past performance outcomes, such as revenue earned or customer churn rates.
Question 2: What does the acronym SMART stand for when defining KPIs?
- Specific, Measurable, Achievable, Relevant, Time-bound (Correct answer)
- Strategic, Managed, Actionable, Reliable, Trackable
- Simple, Meaningful, Accurate, Resourced, Timely
- Structured, Monitored, Attainable, Reviewed, Tested
Correct answer: Specific, Measurable, Achievable, Relevant, Time-bound
SMART KPIs are Specific, Measurable, Achievable, Relevant, and Time-bound to ensure clarity and accountability.
Question 3: A company tracks 'number of new leads generated per month.' This is an example of which type of KPI?
- Lagging indicator
- Financial KPI
- Leading indicator (Correct answer)
- Outcome KPI
Correct answer: Leading indicator
New leads generated is a leading indicator because it predicts future revenue potential before it is realized.
Question 4: Which of the following is the BEST example of a customer-focused KPI?
- Gross profit margin
- Net Promoter Score (NPS) (Correct answer)
- Inventory turnover ratio
- Employee headcount
Correct answer: Net Promoter Score (NPS)
Net Promoter Score measures customer loyalty and willingness to recommend, making it a core customer-focused KPI.
Question 5: What is a KPI cascade in performance management?
- The process of eliminating redundant KPIs
- Aligning organizational KPIs down from strategic to operational levels (Correct answer)
- Reporting KPIs in a waterfall chart format
- Aggregating individual KPIs into a single composite score
Correct answer: Aligning organizational KPIs down from strategic to operational levels
KPI cascading aligns high-level strategic goals with department and individual performance targets throughout the organization.
Question 6: Which ratio measures how efficiently a company uses its assets to generate revenue?
- Current ratio
- Asset turnover ratio (Correct answer)
- Debt-to-equity ratio
- Price-to-earnings ratio
Correct answer: Asset turnover ratio
The asset turnover ratio divides revenue by total assets to show how efficiently a company deploys its asset base.
Business Performance Management Key Performance Indicators and Metrics 1
Which type of KPI measures outcomes that have already occurred and cannot be changed?