Chapter 9

Question 1

This refers to the process of ascertaining whether organizational objectives have been achieved: if not, why not; and determining what activities should then be taken to achieve objectives better in the future.

Answer 1

Controlling

Question 2

This completes the cycle of management functions.

Answer 2

Controlling

Question 3

The control process consists of four steps, namely:

Answer 3

1. establishing performance objectives and standards
2. measuring actual performance
3. comparing actual performance to objectives and standards
4. taking necessary action based on the results of the comparisons

Question 4

In controlling, what has to be achieved must first be determined. Examples of such objectives and standards are as follows:

Answer 4

1. Sales targets
2. Production targets
3. Worker attendance
4. Safety record
5. Supplies used

Question 5

These are expressed in quantity or monetary terms.

Answer 5

Sales targets

Question 6

These are expressed in quantity or quality.

Answer 6

Production targets

Question 7

These are expressed in terms of rate of absences.

Answer 7

Worker attendance

Question 8

These are expressed in number of accidents for given periods.

Answer 8

Safety record

Question 9

These are expressed in quantity or monetary terms for given periods.

Answer 9

Supplies used

Question 10

This is necessary so that when shortcomings occur, adjustments could be made. The adjustments will depend on the actual findings.

Answer 10

measuring actual performance

Question 11

Control consists of three distinct types, namely:

Answer 11

1. feedforward control
2. concurrent control, and
3. feedback control.

Question 12

This type of control measure must be undertaken when management anticipates problems and prevents their occurrence.

Answer 12

Feedforward Control

Question 13

This type of control provides the assurance that the required human and nonhuman resources are in place before operations begin.

Answer 13

Feedforward Control

Question 14

This type of control is undertaken when operations are already ongoing and activities to detect variances are made.

Answer 14

Concurrent Control

Question 15

This type of control is undertaken when information is gathered about a completed activity, and in order that evaluation and steps for improvement are derived.

Answer 15

Feedback Control

Question 16

This validates objectives and standards.
If accomplishments consist only of a percentage of standard requirements, the standard may be too high or
inappropriate.

Answer 16

Feedback control

Question 17

Organizational control systems consists of the following:

Answer 17

1. strategic plan
2. the long-range financial plan
3. the operating budget
4. performance appraisals
5. statistical reports
6. policies and procedures

Question 18

This provides the basic control mechanism for the organization.

Answer 18

strategic plan

Question 19

This is required in engineering firms because of the long lead times needed for capital projects.

Answer 19

Long-Range Financial Plan

Question 20

This indicates the expenditures, revenues, or profits planned for some future period regarding operations. The figures appearing in this are used as standard measurements for performance.

Answer 20

Operating Budget

Question 21

This measures employee performance. As such, it provides employees with a guide on how to do their jobs better in the future.

Answer 21

Performance appraisal

Question 22

This function as effective checks on new policies and programs.

Answer 22

Performance appraisal

Question 23

This pertain to those that contain data on various developments within the firm.

Answer 23

Statistical reports

Question 24

Among the information which may be found in a statistical report pertains to the following:

Answer 24

1. labor efficiency rates
2. quality control rejects
3. accounts receivable
4. accounts payable
5. sales reports
6. accident reports
7. power consumption report

Question 25

This refer to the framework within which the objectives must be pursued.

Answer 25

Policies

Question 26

This is a plan that describes the exact series of actions to be taken in a given situation.

Answer 26

Procedure

Question 27

To be able to assure the accomplishment of the strategic objectives of the company, ____________________ become necessary.

Answer 27

strategic control systems

Question 28

Strategic control system consist of the following:

Answer 28

1. financial analysis 2. financial ratio analysis

Question 29

A review of the ______________ will reveal important details about the company’s performance.

Answer 29

financial statements

Question 30

This contains information about the company’s assets, liabilities, and capital accounts.

Answer 30

balance sheet

Question 31

This contains information about the company’s gross income, expenses, and profits.

Answer 31

income statement

Question 32

This is a more elaborate approach used in controlling activities. Under this method, one account appearing in the financial statement is paired with another to constitute a ratio.

Answer 32

Financial ratio analysis

Question 33

Financial ratios may be categorized into the following types:

Answer 33

1. liquidity 2. efficiency 3. financial leverage 4. profitability

Question 34

These ratios assess the ability of a company to meet its current obligations.

Answer 34

Liquidity Ratios

Question 35

The following ratios are important indicators of liquidity:

Answer 35

1. Current Ratio 2. Acid-test Ratio

Question 36

This shows the extent to which current assets of the company can cover its current liabilities.

Answer 36

Current Ratio

Question 37

formula for computing current ratio

Answer 37

Current ratio = current assets/current liabilities

Question 38

This is a measure of the firm’s ability to pay off short-term obligations with the use of current assets and without relying on the sale of inventories.

Answer 38

Acid-test Ratio

Question 39

formula for acid-test ratio

Answer 39

Acid-test ratio = (current assets -inventories)/current liabilities

Question 40

These ratios show how effectively certain assets or liabilities are being used in the production of goods and services.

Answer 40

Efficiency Ratios

Question 41

Among the more common efficiency ratios are:

Answer 41

1. Inventory turnover ratio 2. Fixed asset turnover

Question 42

This ratio measures the number of times an inventory is turned over (or sold) each year.

Answer 42

Inventory turnover ratio

Question 43

Inventory turnover ratio is computed as follows:

Answer 43

Inventory turnover ratio = cost of goods sold/inventory

Question 44

This ratio is used to measure utilization of the company’s investment in its fixed assets, such as its plant and equipment.

Answer 44

Fixed Asset Turnover

Question 45

The formula used for fixed asset turnover is as follows:

Answer 45

Fixed asset turnover = net sales/net fixed assets

Question 46

This is a group of ratio designed to assess the balance of financing obtained through debt and equity sources.

Answer 46

Financial Leverage Ratios

Question 47

Some of the more important leverage ratios are as follows:

Answer 47

1. Debt to total assets ratio 2. Times interest earned ratio

Question 48

This ratio shows how much of the firm’s assets are financed by debt.

Answer 48

Debt to total assets ratio

Question 49

Debts to total assets ratio may be computed by using the following formula:

Answer 49

Debt to total assets ratio = total debt/total assets

Question 50

This ratio measures the number of times that earnings before interest and taxes cover or exceed the company’s interest expense.

Answer 50

Times interest earned ratio

Question 51

Times interest earned ratio may be computed with the formula:

Answer 51

Times interest earned ratio = (profit before tax + interest expense)/interest expense

Question 52

These ratios measure how much operating income or net income a company is able to generate in relation to its assets, owner's equity, and sales.

Answer 52

Profitability Ratios

Question 53

Among the more notable profitability ratios are as follows:

Answer 53

1. Profit margin ratio 2. Return on assets ratio 3. Return on equity ratio

Question 54

This ratio compares the net profit to the level of sales.

Answer 54

Profit margin ratio

Question 55

The formula used in computing profit margin ratio is as follows:

Answer 55

Profit margin ratio = net profit/net sales

Question 56

This ratio shows how much income the company produces for every peso invested in assets.

Answer 56

Return on assets ratio

Question 57

Formula in computing return on assets ratio:

Answer 57

Return on assets ratio = net income/assets

Question 58

This ratio measures the returns on the owner’s investment.

Answer 58

Return on equity ratio

Question 59

Return on equity ratio may be computed through the formula:

Answer 59

Return on equity ratio = net income/equity

Question 60

When operations become complex, the engineer manager must consider useful steps in controlling. Kreitner mentions three approaches:

Answer 60

1. executive reality check 2. comprehensive internal audit 3. general checklist of symptoms of inadequate control

Question 61

This is undertaken to determine the efficiency and effectivity of the activities of an organization.

Answer 61

internal audit

Question 62

Symptoms of Inadequate Control (Kreitner)

Answer 62

1. An unexplained decline in revenues and profits 2. A degradation of service (customer complaints). 3. Employee dissatisfaction (complaints, grievances, turnover). 4. Cash shortages caused by bloated inventories or delinquent accounts receivable 5. Idle facilities or personnel. 6. Disorganized operations (work flow bottlenecks, excessive paperwork). 7. Excessive costs. 8. Evidence of waste and inefficiency (scrap, rework)