This document discusses various aspects of controlling and financial analysis. It defines controlling as evaluating performance and applying corrective measures if needed to ensure plans are followed. It outlines techniques like financial ratio analysis, return on investment, management audit, and social audit. It also discusses ratio analysis in depth, categorizing ratios into liquidity, activity, leverage, and profitability. Specific ratios under each category are defined such as current ratio, debt-equity ratio, and profit margin. Human resource accounting and management information systems are also summarized as important tools for controlling and analysis.

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PRESENTED BY : SUBY A JOHN
ROLL NO : 56

2. Control
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Controlling is defined as “
determining what is being
accomplished, i.e. evaluating the
performance and if necessary,
applying corrective measures so
that performance takes place
according to plans.

3. Steps in Controlling
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 Establish standards of performance.
 Measure actual performance.
 Compare the actual performance with
standards
 To find variations if any.
 To take corrective actions to avoid such
variations.

4. Techniques for overall control
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 Financial Ratio Analysis
 Control through Return on Investment(ROI)
 Management Audit
 Social Audit
 Human resource Accounting
 Management Information System(MIS)

5. analysis
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 Ratio is an expression of relation between two figures
or amounts.
 Shows the relation between two variables
 to derive meaningful conclusions.

6. Definition
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 Robert Anthony
 Simply
one no. expressed in terms of another.
 Metcalf and Titard
A
process of evaluating relationship b/w
component parts of financial statements to
obtain a better understanding of firm’s
position and performance.

7. Classification of ratios
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 Liquidity Ratios
 Average Ratios
 Profitability ratios
 Liquidity ratios

8. Liquidity ratios
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 Portrays capacity of a firm to meet its short term
obligations from its short term resources.
 These are expressed in the form of
 Current Ratio (working capital ratio)


Liquidity Ratio (acid test ratio)


Shows the relation b/w current asset and current liability.
Shows the relation b/w quick assets and current liability
Absolute Liquidity Ratio (cash position ratio)

Obtained by dividing marketable securities

9. Activity ratios
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 Known as Turnover Ratios or Efficiency Ratios measures
the efficiency of the assets employed.
 i.e. speed of assets being converted into cash
 These are expressed in the form of
 Inventory Turnover Ratio


Receivable Turnover Ratio


Investment made in inventory is efficiently used or not
Shows how promptly the organization is able to collect its dues
Assets Turnover Ratio

Efficiency of assets for generating sales

10. Leverage ratios
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 Indicates the long term solvency position of the firm.
 i.e. indicates the relative amount of fund supplied by others
 These ratios are in the form of:
 Debt Equity Ratio


Debt Total Capital Ratio


Relationship b/w owners capital and borrowed fund
Proportion of debt to the total capital employed
Interest Coverage Ratio

Interest burden borne in relation to its profit.

11. Profitability Ratios
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 Shows the ability of an organization to earn profit in
relation to its sales and/or investment.
 These are expressed in the form of
 Profit margin


Either gross profit or net profit, shows the relation between profit and
sales & indicates profitability of the firm.
Return on Investment
Indicates the return in capital employed
 i.e. amt of profit earned in relation to the investment made.
 Focuses on optimizing return


12. #Management Audit
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 Evaluation of management as a whole
 A periodical checkup to ensure sound and healthy
business activity
 Introduced in United States as a tool of management
control.

13. report
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 Whether there is a healthy relation b/w management
and staff.
 Whether the methods of production are outdated or
modern
 Whether the returns to shareholders are adequate.

14. #Social Audit
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 Refers to Evaluation or assessment of a co’s performance
against planned goals in the areas of social
responsibility.
 Developed by Howard R Bowen of USA in 1953.
 Applied by the business organizations to measure their
social performance

15. Definition of Social Audit
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“a commitment to systematic assessment of and
reporting on some meaningful, definable domain of the
company's activities that have social impact.”

16. Accounting
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 Social point : An enterprise comprises of two resources:
 Human resources
 Physical resources
 Success of any organization depends on the quality and
caliber of the people working in it.
 Human resources are the most precious resources in a
an organization therefore measures are taken to
develop and measure these resources.
 HRA provides a tool for measuring, valuing and to take
appropriate actions.

17. Definition of HRA
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The American Accounting Association has defined HRA
as, “the process of identifying and measuring data
about human resources and communicating
information to the interested users.”
Woodruff defined HRA as, “ an attempt to identify and
report investment made in an organization that are not
presently accounted for under conventional accounting
practice. Basically, it is an information system that tells
the management what changes over time are occurring
to the human resources of business.”

18. Methods of measuring HRA
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 Historical Cost Method
 Replacement Cost Method
 Standard Cost Method
 Present Value of Future Earnings

19. Historical Cost Method
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 Expenditure incurred on selection, training and
developing of human resources is maintained and a
portion of it is written off against income of the next few
years during which the human resource will provide
service.

20. Replacement Cost Method
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 Measures the cost to replace the existing firm’s human
resources to reach the level of existing human resources.
 Developed by Rensis Likert and Eric G Flamholtz.

21. Standard Cost Method
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 Employees are categorized into different groups on
basis of their hierarchical positions.
 SC is fixed and value is calculated on tat basis

22. Present Value of Future
Earnings
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 It recognizes an individual’s expected economic vale to
the enterprise during his remaining service period.
 An estimate about the future earning is made, and these
earnings relateelate

23. Information System
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 Information is the life blood of the organization.
 Flow of information is done on regular basis through
information system like MIS
 Its not a control technique
 It helps in planning and other organizational process
 MIS is defined as, “the system of information to each
manager at the right time, in right form and relevant
one which aids his understanding and stimulates his
action.

24. at a glance…
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 Steps in controlling
 Techniques of controlling
 Control
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Financial Ratio Analysis
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Leverage ratios
Activity ratios
Profitability ratios
Liquidity ratios
Control through Return on Investment(ROI)
Management Audit
Social Audit
Human resource Accounting
Management Information System(MIS)

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Thank you…