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  1. 1. Control TechniquesMultiMedia by 2002 South-
  2. 2. Functional Subsystems Operations Finance Marketing (production) Management informationHuman resources systems MultiMedia by 2002 South-
  3. 3. Control TechniquesMultiMedia by 2002 South-
  4. 4. Control TechniquesMultiMedia by 2002 South-
  5. 5. Control TechniquesMultiMedia by 2002 South-
  6. 6. Control TechniquesMultiMedia by 2002 South-
  7. 7. Control TechniquesMultiMedia by 2002 South-
  8. 8. Finance Managers Determine current Measure and and future ability to monitor ongoing meet financial operations. obligations. Prepare estimates and forecasts for future sources and uses of funds.MultiMedia by 2002 South-
  9. 9. Financial Controls Financial StatementsRatio Analysis Audits Responsibility CentersMultiMedia by 2002 South-
  10. 10. The Equation that Describes a Balance Sheet Assets = Liabilities + Stockholders’ EquityMultiMedia by 2002 South-
  11. 11. Assets Fall Into One of Two Categories1. Current assets are 2. Fixed assets are assets cash or items that are not intended for sale normally converted or conversion to cash. into cash within one Fixed assets include year from the date of land, buildings, and the balance sheet. equipment. MultiMedia by 2002 South-
  12. 12. Liabilities Current and Long-Term Debts  Current liabilities are debts  Current liabilities are debts due and payable within one due and payable within one year of the date of the balance year of the date of the balance sheet. sheet. Long-term liabilities are those Long-term liabilities are thoseMultiMedia by 2002 South-
  13. 13. Income Statement Equation Income - Expenses = Profit or LossMultiMedia by 2002 South-
  14. 14. Income Statement Seven Categories  Net sales  Costs of goods sold  Gross profit  Operating expenses  Net income (or loss) before taxes  Taxes  Net income, the profit left after paying taxesMultiMedia by 2002 South-
  15. 15. Financial Audits• Internal Audits – Keep problems in-house. – Are likely to be conducted by people who know operations well. – May lack objectivity. – May also lack the power to penetrate cover-ups.• External Audits – An independent public accounting firm conducts an external audit. – Federal regulations require publicly traded companies to conduct certified external audits each year. – Enhances creditability. MultiMedia by 2002 South-
  16. 16. Budgets Serve Managers in Four Important Ways1. They expedite allocation and coordination of resources for programs and projects.2. They operate as a powerful monitoring system when supplemented with periodic budget updates.3. They provide rigorous control guidelines for managers by setting limits on expenditures.4. They facilitate evaluation of individual and department performance. MultiMedia by 2002 South-
  17. 17. Five Budget Considerations  Adjusting and pricing  Identifyinggoals, plans, to  Planning and schedulingand  Setting goals  Locating needed funds resources to match actual resources reach the goals fund availability.MultiMedia by 2002 South-
  18. 18. Budgets Four Standardized Approaches (1 of 4)Top-Down Budgeting  Senior managers prepare budgets and distribute them to lower levels, with or without input from below.  This method may plan and control without cooperation and knowledge of subordinates. MultiMedia by 2002 South-
  19. 19. Budgets Four Standardized Approaches (2 of 4)Bottom-Up Budgeting  Taps the knowledge and experiences of all organization members.  Those closest to the planned activities contribute to building the budget that affects them. MultiMedia by 2002 South-
  20. 20. Budgets Four Standardized Approaches (3 of 4)Zero-Based Budgeting  Eliminates complacency.  Must justify every dollar requested in light of strategic plans and goals.  Must list the costs of all resources.  Must choose priorities and create alternatives for accomplishing the unit’s part in the overall strategic plan. MultiMedia by 2002 South-
  21. 21. BudgetsFour Standardized Approaches (4 of 4)Flexible Budgeting  Levels of expense are correlated with specified output levels.  Sets “meet or beat” standards with which expenditures can be compared.  Unit expenses within budgeted amounts are usually permitted.MultiMedia by 2002 South-
  22. 22. Financial Budgets Cash Budgets project the amount of cash that will flow into and out of an organization and its subsystems during a fixed period. Capital Expenditure Budgets project the short- and long-term funding needed to acquire capital goods. MultiMedia by 2002 South-
  23. 23. Marketing Umbrella Product design Distribution Packaging Customer service Pricing SalesMultiMedia by 2002 South-
  24. 24. Marketing Control Techniques Market Test Marketing research marketing ratios Sales quotas StockageMultiMedia by 2002 South-
  25. 25. Marketing Research . A feedforward control technique Consists of gathering and analyzing . geographic, demographic, and psychographic dataMultiMedia by 2002 South-
  26. 26. Test Marketing–Four Points1. Introduce it to a limited market on a small scale to assess its acceptance.2. Disadvantage of extensive test marketing is that it can tip a company’s hand to competitors.3. Planners analyze the results of testing to determine if the company should proceed with manufacturing, distribution, or modifications.4. Limits the risks a company faces when introducing something new. MultiMedia by 2002 South-
  27. 27. Marketing RatiosFrequently used measures include:Frequently used measures include:   Ratio of profit to sales Ratio of profit to sales   Costs of selling to gross profit Costs of selling to gross profit   Sales calls to orders generated Sales calls to orders generated   Profitability of each order Profitability of each order   Changes in sales volume to price changes Changes in sales volume to price changes   Ratio of bad debts to total credit granted Ratio of bad debts to total credit granted   Sales volume to production capacity for the entire organization Sales volume to production capacity for the entire organization   Market share Market share   Order turnaround time Order turnaround time MultiMedia by 2002 South-
  28. 28. Stockage  Level of inventory.  Money tied up in inventories is unavailable for other uses.  Must reduce the number of slow-moving items or eliminate the items altogether.  Devote most of the best display areas to items that yield the largest profits.  Tracking stockage levels, managers can: Determine normal usage rates. Maintain minimum levels. Set efficient reorder points.MultiMedia by 2002 South-
  29. 29. Cost of Maintaining InventoriesMultiMedia by 2002 South-