Question

The balanced scorecard uses both financial and nonfinancial measures. Explain the purpose of the balanced scorecard and identify two examples of nonfinancial measures that might be included in a balanced scorecard.

Answer 1

The Balanced Scorecard refers to a strategic tool that is used to identify specific financial and non financial indicators.It converts the company's strategy into four categories.They are financial,customer ,internal business process and learning and growth.The financial measures will indicate the past performance of the firm.The customer ,internal business process and learning and growth measures act as a n indicator of the future financial performance.The Balance Score Card is used by companies to communicate strategy,ensure that the goals of the individuals and the units align,to connect strategy to the budgeting and to get feedback which van then be used for improvement of the strategy.The examples of non financial measures are customer measures like the customer satisfaction(refers to the success firm had in meeting the expectations of the customer),customer retention(refers to the change in business with each customer)another non financial measure is internal business process measures like Innovation (Effective use of research and development in producing new products) and post sale service(refers to adding value to a product or service while collecting feedback pertaining to the same)