【正文】 of raw materials—performance evaluations should be matched to appropriate measures of results. Some financial measures of performance include: Gross margin measures profitability after direct production costs but before other costs that are not specifically tied to production, such as marketing, administrative, and interest expenses. Gross margin = $40,000/$120,000 = 33% SGamp。A (selling, general, and administrative costs) as a percentage of sales is a measure of an organization39。s effectiveness in controlling costs. SGamp。A as a percentage of sales = $20,000/$120,000 = % Revenue per employee is a measure of the operational efficiency of an organization, relative to other panies in the same industry. Revenue per employee = $120,000,000/225 = $533,333171。 Previous |Next187。Personal InsightsInterpret numbers with careRelated TopicFinance EssentialsBudgeting OverviewEvaluating management39。s performanceInterpret numbers with carePersonal InsightAlmost everything involves a number with a distribution. So, there39。s an average, there39。s a measure of risk about the number and almost all things we deal with are constructs. The bottom line of a pany39。s balance sheet doesn39。t actually mean very much: you could produce six other balance sheets which mean every bit as much—six other versions of profit. It doesn39。t matter what one says about numbers, you can39。t do without them。 but what you can do is find out about the surrounding circumstances, which tell you about the risks attached to the numbers and you can do quite a lot that way. Never fall for averages。 it doesn39。t matter what average you choose—there are half a dozen different averages you can use—they are all misleading. What you need to know is the range of risk above the average。 it39。s a difficult thing to do. One thing you can always do is ask: Well, how would this number look if things were really different? So, you subject the thing to stress and with key numbers—even if you do it informally—you should always do that. Almost everything you do depends on understanding numbers, and all numbers can be difficult to understand. So interpret numbers with care, as they all have a certain risk attached to them, and should be treated with the proper respect.Sir Peter MiddletonBarclays GroupSir Peter Middleton enjoyed a long and distinguished career in HM Treasury spanning 30 years, ultimately ascending to bee Permanent Secretary from 1983 to 1991.He spent the next 13 years with Barclays as Group Deputy Chairman and Executive Chairman of its investment bank, BZW. In 1997 he became Chairman of Barclays Capital.In May 1998 he relinquished his executive responsibilities, but remained a NonExecutive Director of Barclays and Barclays Bank. Later that year he resumed the helm following the unexpected resignation of the Chief Executive.He was then appointed Group Chairman in April 1999, and in October stepped down as Group Chief Executive following the appointment of Matthew Barrett. He left Barclays in late 2004.Sir Peter Middleton took on the Chairmanship of Camelot, the operator of The National Lottery, in September 2004.He is also Deputy Chairman of United Utilities, and is on the Board of the National Institute of Economic and Social Research.171。 Previous |Next187。Types of BudgetsBudget categoriesThere are different types of budgets for different purposes. Some of the main types of budgets include: Operating budgets reflect daytoday expenses and depreciation (the current portion of capitalized expenses). They typically cover a oneyear period. Capital budgets outline planned outlays for investments in plant, equipment, and product development. Capital budgets may cover periods of three, five, or ten years. Cash budgets plot the expected cash balances the organization will experience during the forecast period, based on information provided in operating and capital budgets. Cash budgets are prepared by the finance department and are critical to ensuring that the pany has sufficient liquidity (cash and credit) available to meet expected cash disbursements.171。 Previous |Next187。See AlsoSteps for preparing a cash budgetCash budget worksheetRolling up the budgetsDepartment or unit managers are most frequently asked to develop operating budgets and capital budgets for their departments. You can also create subsets of the operating and capital budgets for individual projects, geographic locations, or large, lineitem expenses such as advertising. These detailed schedules allow you to keep a closer eye on revenues and expenses within your department. The diagram below shows how departmental operating and capital budgets are coordinated to create financial budgets including the cash budget, the budgeted balance sheet, and the budgeted statement of cash flows. All of these budgets together are rolled up into the master budget, summarizing the financial projections within an organization for a given period of time. Coordinating departmental budgets into the master budget171。 Previous |Next187。Approaches to BudgetingTraditional budgeting and alternate approachesMei Po holds up two different kinds of budget spreadsheets.Many organizations use a traditional budget—a budget that covers a one year period and presents forecasts that do not change during the life of the budget cycle. Companies use traditional budgets because they are easy to put together and simplify coordination of budget assumptions across different departments. Traditional budgets, however, have been under growing attack from those who feel that they no longer serve a modern organization39。s needs. Critics plain that budgets are timed incorrectly (too long or too short)。 rely on inappropriate measures。 and are either too simplistic (or too plex), too rigid (inflexible in a changing business environment), or too political (the incentives for managers send the wrong messages). As a result, some organizations blend al