Business Performance Management Knowledge 3 — Questions and Answers
Question 1: In BPM, what is the role of a 'management dashboard'?
- To automate payroll processing
- To provide a visual summary of key performance indicators for quick decision-making (Correct answer)
- To store raw transactional data
- To generate regulatory compliance reports
Correct answer: To provide a visual summary of key performance indicators for quick decision-making
A management dashboard consolidates KPIs and metrics into a visual interface that allows leaders to monitor performance at a glance.
Question 2: Which of the following best describes 'activity-based costing' (ABC)?
- A method that assigns costs to products based solely on labor hours
- A costing approach that traces costs to activities and then to products or services (Correct answer)
- A technique for forecasting future revenues
- A system that allocates overhead equally across all products
Correct answer: A costing approach that traces costs to activities and then to products or services
ABC identifies activities in an organization and assigns costs to each activity, then traces those costs to products or services based on actual consumption.
Question 3: What does the term 'EBITDA' stand for in financial performance measurement?
- Earnings Before Interest, Taxes, Depreciation, and Amortization (Correct answer)
- Estimated Budget Including Total Departmental Allowances
- Earnings Based on Internal Tax and Depreciation Analysis
- Equity Before Interest, Taxes, Dividends, and Assets
Correct answer: Earnings Before Interest, Taxes, Depreciation, and Amortization
EBITDA is a widely used profitability metric that removes the effects of financing, accounting, and tax decisions to assess core operating performance.
Question 4: In performance management, what is a 'lagging indicator'?
- A metric that predicts future performance trends
- A measure that reflects the outcome of past activities (Correct answer)
- An industry benchmark used for comparison
- A qualitative assessment of employee satisfaction
Correct answer: A measure that reflects the outcome of past activities
Lagging indicators, such as quarterly revenue or net profit, confirm trends that have already occurred rather than predicting future outcomes.
Question 5: Which planning approach breaks long-term strategic goals into shorter operational plans, typically one year?
- Scenario planning
- Operational budgeting (Correct answer)
- Zero-based budgeting
- Capital expenditure planning
Correct answer: Operational budgeting
Operational budgeting translates multi-year strategic plans into annual plans with specific resource allocations and performance targets.
Question 6: What is 'cause-and-effect analysis' used for in a strategy map?
- Identifying which products generate the most revenue
- Showing how improvements in one area lead to desired outcomes in another (Correct answer)
- Allocating overhead costs to business units
- Ranking employees by performance score
Correct answer: Showing how improvements in one area lead to desired outcomes in another
A strategy map uses cause-and-effect links to show how learning & growth initiatives drive process improvements, which improve customer outcomes, which drive financial results.
Question 7: Which method involves starting each budget cycle from zero rather than using the prior year as a baseline?
- Incremental budgeting
- Rolling budgeting
- Zero-based budgeting (Correct answer)
- Flexible budgeting
Correct answer: Zero-based budgeting
Zero-based budgeting requires every expense to be justified for each new period, eliminating assumptions based on prior spending.
Business Performance Management Knowledge 3
In BPM, what is the role of a 'management dashboard'?