Need Help Responding To The 4 Discussion Posts

Need Help Responding To The 4 Discussion Postdiscussion 1steps Of Cont

Discuss the importance of the four steps involved in the controlling function in management. Explain why a good understanding of various ratios used by accountants and managers is essential to the controlling process. Use specific examples to support your explanation.

Paper For Above instruction

The control function is a vital aspect of management that ensures organizational activities align with established standards and objectives. The four primary steps in the controlling process—reviewing standards, measuring performance, comparing outcomes, and making decisions—are crucial for maintaining organizational effectiveness and efficiency.

Firstly, reviewing standards established during the planning phase provides a benchmark against which actual performance is assessed. Without clear standards, evaluation and corrective action cannot be accurately determined. For example, a manufacturing company may set standards for production volume or defect rates; regularly reviewing these standards helps identify deviations early. Secondly, measuring performance involves collecting data on actual operations using various indicators, such as sales figures, production output, or customer satisfaction metrics. This measurement is essential to understand how well the organization is performing relative to its standards.

Thirdly, comparing performance outcomes with the predetermined standards allows managers to identify areas where performance exceeds expectations or falls short. This comparison provides insight into operational strengths and weaknesses. For example, if sales fall below targets, management can investigate causes and implement corrective measures. Finally, making informed decisions based on these comparisons enables management to take appropriate actions—either reinforcing positive behaviors or correcting deviations. For instance, if costs are higher than projected, managers might streamline processes or renegotiate supplier agreements.

A good understanding of various ratios employed by accountants and managers enhances the controlling process by providing quantitative measures of performance. Ratios such as profit margin, liquidity ratios, and inventory turnover offer a snapshot of financial health and operational efficiency. For example, a decline in the current ratio could indicate liquidity problems, prompting management to address cash flow issues proactively. Similarly, analyzing the gross profit margin helps evaluate pricing strategies and cost controls.

These ratios enable managers to interpret complex financial data quickly, facilitating timely decisions. They also allow for benchmarking against industry standards, helping organizations identify areas needing improvement. For example, if a company's inventory turnover is lower than the industry average, it may suggest overstocking or slow-moving inventory, prompting corrective action.

In summary, the four steps of the controlling function—review, measure, compare, and decide—are essential for organizational success. A thorough understanding of financial and operational ratios further strengthens this function, enabling managers to monitor performance accurately, identify issues early, and implement effective corrective measures to achieve organizational goals.

References

• Anthony, R. N., & Govindarajan, V. (2007). Management Control Systems (12th ed.). McGraw-Hill Education.
• Baack, D., Reilly, M., & Minnick, C. (2014). The five functions of effective management (2nd ed.). San Diego, CA: Bridgepoint Education, Inc.
• Guilding, C., Mathews, B. P., & Rittenberg, M. (2000). An international comparison of strategic management control systems. Accounting, Organizations and Society, 25(3), 187-209.
• Kaplan, R. S., & Norton, D. P. (1992). The Balanced Scorecard—Measures that Drive Performance. Harvard Business Review, 70(1), 71-79.
• Horngren, C. T., Sundem, G. L., Stratton, W. O., Burgstahler, D., & Schatzberg, J. (2014). Introduction to Management Accounting (16th ed.). Pearson.
• Drury, C. (2013). Management and Cost Accounting (8th ed.). Cengage Learning.
• Weygandt, J. J., Kieso, D. E., & Kimmel, P. D. (2019). Financial Accounting (10th ed.). Wiley.
• Rubin, R. S. (2001). Measurement of Organizational Performance. Journal of Business & Economics Research, 1(2), 1-12.
• Anthony, R. N. (1965). Planning and Control Systems: A Framework for Analysis. Harvard Business School Press.
• Garrison, R. H., Noreen, E. W., & Brewer, P. C. (2018). Managerial Accounting (16th ed.). McGraw-Hill Education.