multimedia by stephen m. peters© 2002 south-western control techniques

MultiMedia by Stephen M. Peters © 2002 South-Western

Control Techniques


Functional Subsystems

Finance

Human resources

MarketingOperations

(production)

Management information systems


Control Techniques


Finance Managers

Prepare estimates and forecasts for future sources

and uses of funds.

Determine current and future ability to

meet financial obligations.

Measure and monitor ongoing

operations.


Financial Controls

Ratio Analysis Audits

Responsibility Centers

Financial Statements


The Equation thatDescribes a Balance Sheet

Assets = Liabilities + Stockholders’ Equity


Assets Fall IntoOne of Two Categories

1. Current assets are cash or items that are normally converted into cash within one year from the date of the balance sheet.

2. Fixed assets are assets not intended for sale or conversion to cash. Fixed assets include land, buildings, and equipment.


Liabilities Current and Long-Term Debts

Current liabilities are debts due and payable within one year of the date of the balance sheet.

Current liabilities are debts due and payable within one year of the date of the balance sheet.

Long-term liabilities are those due after one year from that date.

Long-term liabilities are those due after one year from that date.


Income Statement Equation

Income - Expenses = Profit or Loss


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 taxes


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.


Budgets Serve Managersin Four Important Ways

1. 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.


Five Budget Considerations

Setting goalsPlanning and scheduling to

reach the goals Identifying and pricing

resources Locating needed funds Adjusting goals, plans, and

resources to match actual fund availability.


BudgetsFour 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.



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.



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.



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.


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.


Marketing Umbrella

Product design

Packaging

Pricing

Distribution

Sales

Customer service


Marketing Control Techniques

Market research

StockageSales quotas

Test marketing

Marketing ratios


Marketing Research

A feedforward control technique

Consists of gathering and analyzing geographic, demographic, and

psychographic data

.

.


Test Marketing–Four Points

1. 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.


Marketing Ratios

Frequently used measures include: Ratio of profit to sales Costs of selling to gross profit Sales calls to orders generated Profitability of each order Changes in sales volume to price changes Ratio of bad debts to total credit granted Sales volume to production capacity for the entire organization Market share Order turnaround time

Frequently used measures include: Ratio of profit to sales Costs of selling to gross profit Sales calls to orders generated Profitability of each order Changes in sales volume to price changes Ratio of bad debts to total credit granted Sales volume to production capacity for the entire organization Market share Order turnaround time


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.


Cost of Maintaining Inventories

multimedia by stephen m. peters© 2002 south-western control techniques

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