MGMT 15

Top down budgeting

Top managers establish budgets and hand them down to middle and lower managers for review and implementation

-Current or Liquidity Ratio -Solvency Ratio

Types of Ratios: -indicate orgs ability to meet short term debt obligations -allow company to assess ability to meet long term obligations

Financial control

____ control does not exist in same way but control of financial resources

Feedback Control

analysis of financial statements may occur as a form of ___ control, where managers used info provided such as statements to evaluate orgs actual past performance to determine changes for future

capital budgeting

concerned with intermediate and long term control of capital acquistions such as plan and equipment

Control Process

four basic steps: establishing performance standards, measuring performance, comparing performance against standards and evaluation and corrective action

Management control

includes all activities an org undertakes to ensure that its actions lead to achievement of its objectives

Feedback control

monitors firm's outputs, results of transformation process

Operations control preliminary, screening, feedback

regulates one or more individual operating systems with org 3 basics forms are

-can lead to better coordination of org activities because it often involves employees from various areas, allowing conflicts to be discovered and discussed before problem occurs -brings together diverse organizational members to determine overall objectives -implies need for org to adapt continually in face of constant environmental change

Advantages of budgeting

-difficult to do -managers must allocate scarce financial resources among many depts. -overreliance on previous period's budget increases chance that managers will overlook current environmental conditoins

Disadvantages of budgeting

Strategic control very important for highly complex and dynamic environments that require more detail, continuous control

control that ensure that org effectively understands and responds to the realities of its environment very important for companies that operate in _____

operating budgeting

deals w/ relatively short term financial control concerns, including having sufficient financial cash on hand to cover daily financial obligations

Balance sheet

orgs financial position at given moment, includes what firm owns and assets that are financed with its own and borrowed money

Financial audit financial control

periodic comprehensive examination of firm's financial records sort of a double checking technique of ___ control

management control system

planned, ordered scheme of management control that allows managers to readily assess where firm actually is at in point of time relative to where it wants or expects to be

Internal controls

processes that developed to provide assurance that an org reaches its objectives relating to operational efficiency, accuracy of financial reporting and regulatory compliance

-Create effective control -Encourage Employee Participation -Use MBO (management by objectives) -Use checks and balances

4 ways managers can overcome resistance to control: -probably best way, through planning and maintenance rather than doing what has always been done in past -less likely to resist a system if employees helped -management philosophy based on converting organization objectives into individual objectives - provided documentation for managerial control decisions

-integrated with planning -flexible -accuracy -timeliness -objectivity- info pertaining to deviations must be uncovered and reported in detail

Effective control systems are typically: (5)

-Correcting deviation -Change standards -Maintain status quo

Evaluating performance -when actual is too far away from standard performance - likely choice when observation of actual performance leads managers to conclude that original stands were unrealistic in given conditions -when performance standards are either met or nearly met

Bottom up budgeting

Flows from lower levels of an organization for review by top management and involves those more directly engaged in actual tasks covered by budget

Negotiation budgeting

Involves give and take between up and lower management to develop most appropriate form of budgetary control of given situation

-over control -inappropriate focus -rewards for inefficiency -accountability

Reasons for resistance to control: -appropriate level of control is situational in nature, managers/companies must realize how much control they are instilling -not putting priority on most important feature or task -when department/person receives more than they deserved -installing control system that shows employees are not performing up to standards

Bureaucratic vs Clan Rigid hierarchical vs informal and organic structure Formal vs self controls Reward system focused on individual employee compliance vs focused on group performance Limited vs extensive employee input

Under Organizational control-> Bureaucratic vs Clan in: Structure Control Reward system Employee Input

Organizational control

broad based form of control that guides all org activities and oversees overall functioning of whole firm

Zero based budgeting

budgeting method in which managers thoroughly reevaluate org activities to determine their true level of importance

Triple bottom line approach also known as people, planet, profit

focuses on social, environmental and economic impact of company's operations equally and simultaneously also known as

statistical process control

form of screening control which employs control charts to continuously track performance variation over time

Ratio analysis

managers take info from balance sheets and income statements to measure company's efficiency, profitability, and sources of finances relative to other orgs

Balanced Scorecard benefits of having both financial and nonfinancial aspects of company's operations allows for picture of past, present and future performance

method of nonfinancial controls that is management control system customized for company's industry, technology, mission and strategy benefits of this control system include:

Preliminary control

monitors deviations in quality and quantity of firm's resources to try to prevent deviations before entering system, focus on inputs to good/service production process

Nonfinancial controls

provides a company with method to measure performance like ethics and compliance activities and those related to sustainability

Screening control

regulates operations to ensure that they are consistent with objectives, focus on transformation process that converts inputs into outputs

Income statement

shows profitability of an org over time, helps mangers focus on overall revenue from sales and investment, and the costs

Performance standards

targets set by management against which actual performance is compared at a future date closely related to orgs goals, and reflects orgs strategy