controlling Flashcards
refers to the process of ascertaining whether organizational objectives have been achieved.
controlling
complete the cycle of management functions
controlling
4 steps of control process
- establishing performance objectives and standards
- measuring actual performance
- comparing actual performance to objectives and standards
- taking necessary action based on the results of the comparisons
5 objectives and standards
- sales targets
- production targets
- worker attendance
- safety record
- supplies used
(objectives and standards). which are expressed in quantity or monetary terms.
sales targets
(objectives and standards). which are expressed in quantity or quality.
production targets
(objectives and standards). which are expressed in terms of rate of absences.
worker attendance
(objectives and standards). which is expressed in number of accidents for given periods.
safety record
(objectives and standards). which are expressed in quantity or monetary terms for given periods.
supplies used
3 necessary actions may be undertaken
- hire additional personnel
- use more equipment
- require overtime
3 distinct types of control
- feedforward control
- concurrent control
- feedback control
type of control measure undertaken when management anticipates problems and prevent their occurence.
feedforward control
this type of control provides the assurance that the required human and nonhuman resources are in place before operations begin.
feedforward control
this type of control is undertaken when operations are already ongoing and activities to detect variances are made.
concurrent control
it is always possible that deviations from standards will happen in the ————–
production process
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.
feedback control
aimed at improving future activities are features of feedback control.
corrective actions
6 organizational control systems
- strategic plan
- long-range financial plan
- operating budget
- performance appraisals
- statistical reports
- policies and procedures
provides the basic control mechanism for the organization.
strategic plan
indicates the expenditures, revenues, or profits palnned for some future period regarding operations.
operating budget
measures employee’s performance. as such, it provides employees with a guide on how to do their jobs better in the future.
performance appraisal
pertain to those that contain data on various developments within the firm.
statistical reports
7 statistical reports
- labor efficiency rates
- quality control rejects
- accounts recievable
- accounts payable
- sales reports
- accident reports
- power consumption report
refer to the framework within which the objectives must be pursued.
policies
is a plan that describes the exact series of actions to be taken in a given situation.
procedure
2 strategic control systems
- financial analysis
- financial ratio analysis
contains information about the company’s gross income, expenses, and profits.
income statements
4 category of financial ratios
- liquidity
- efficiency
- financial leverage
- profitability
these ratios assess the ability of a company to meet its current obligations.
liquidity ratios
2 important indicators of liquidity
- current ratio
- acid-test ratio
LR. this shows the extent to which current assets of the company can cover its current liabilities.
current ratio
current ratio formula
CA or current assets / CL or current liabilities
LR. this is a measure of the firm’s ability to pay off short-term obligations with the use of current assets without relying on the sale of inventories.
acid-test ratio
acid-test ratio formula
CA or current assets - CL or current liabilities or inventories
these ratios show how effectively certain assets or liabilities are being used in the production of goods and services.
efficiency ratios
2 common efficiency ratios
- inventory turnover ratio
- fixed asset turnover
ER. this ratio measures the number of times an inventory is turned over (or sold) each year.
inventory turnover ratios
inventory turnover ratio formula
cost of goods sold / inventory
ER. this ratio is used to measure utilization of the company’s investment in its fixed assets, such as its plant and equipment.
fixed asset turnover
fixed asset turnover formula
net sales / net fixed assets
this is a group of ratios designed to assess the balance of fianncing obtained through debt and equity sources.
financial leverage ratios
2 important leverage ratios
- debt to total assets ratio
- times interest earned ratio
FLR. this ratio shows how much of the firm’s assets are financed by debt.
debt total assets ratio
debt to total assets ratio formula
total debt / total assets
FLR. this ratio measures the number of times that earnings before interest and taxes cover or exceed the company’s interest expense.
times interest earned ratio
time interest earned ratio formula
profit before tas + interest expense / interest expense
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.
profitability ratios
3 notable profitability ratios
- profit margin ratio
- return on assets ratio
- return on equity ratio
PR. this ratio compares the net profit to the level of sales.
profit margin ratio
Profit margin ratio formula
net profit / net sales
PR. this ratio shows how much income the company produces for every peso invested in assets.
return on assets ratio
return on assets ratio formula
net income / assets
PR. this ratio measures the returns on the owner’s investment.
return on equity ratio
return on equity ratio formula
net income / equity
3 approaches kreitner mentions
- executive reality check
- comprehensive internal audit
- general checklist of symptoms of inadequate control
is one undertaken to determine the efficiency and effectivity of the activities of an organization.
internal audit
aims to detect dysfunctions in the organization before they bring bigger troubles to management.
comprehensive internal audit
3 means to identify control problems
- executive reality check
- comprehensive internal audit
- general checklist of symptoms of inadequate control
is important because it compliments the other management functions.
controlling
