Establish objectives and standards Sale targets – expressed in quantity or monetary terms Production targets -? expressed in quantity or quality Worker attendance – expressed in terms of rate of absences Safety record expressed in number of accidents for given periods Supplies used – expressed in quantity or monetary terms for given periods 2. Measure actual performance Measurements must be accurate enough to spot deviations or variances between what really occurs and what is most desired.
Without measurement, effective control is not possible. . Compare results with objectives and standards The comparison of actual performance with desired performance establishes the need for action. (Historical / Relative / Engineering) 4. Take necessary action Taking any action necessary to correct or improve things. TYPES OF CONTROL 1. Afterward Control Sometimes called the Preliminary Control, they are accomplished before a work activity begins. The type of control measure undertaken when management anticipates problems and prevents their occurrence.
They make sure that proper directions are set and that the right resources are available to accomplish them. 2. Concurrent Control Focus on what happens during the work process. Sometimes called Steering Control, they monitor ongoing operations and activities to make sure that things are being done correctly. The type of control measure undertaken when operations are already ongoing and activities to detect variances are made. 3. Feedback Control Sometimes called Opposition Control, they take place after an action is completed. They focus on end results, as opposed to inputs and activities.
Current ratio – the extent to which current assets of the company can cover its current liabilities. Current ratio = current assets / current liabilities Acid-?test ratio -? this is a measure of the firm’s ability to pay off short – term obligations with the use of current assets and without relying on the sale of inventories. Acid-test ratio = current assets – inventories / current liabilities b. Efficiency Ratios -? show how effectively certain assets or liabilities are being used in the production of goods and services.
Inventory turnover ratio – measures the number Of times an inventory is turned over (or sold) each year. Inventory turnover ratio = cost of goods sold / inventory Fixed asset turnover – used to measure utilization of the company’s investment in its fixed assets, such as its plant and equipment. Fixed asset turnover = net sales / net fixed assets c. Financial Leverage Ratios – this is a group of ratios designed to assess the balance of financing obtained through debt and equity sources. Debt to total assets ratio – shows how much of the firm’s assets are financed by debt.
Debt to total assets ratio = total debt / total assets Times interest earned ratio – measures the number of times that earnings before interest and taxes cover or exceed the compass interest expense. Times interest earned ratio profit before tax + interest expense interest expense d. Profitability Ratios – these ratios measure how much operating income or net income a company is able to generate in relation to its assets, newness equity and sales. Profit margin ratio – compares the net profit to the level of sales. Profit margin ratio net profit / net sales