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PRESENTED BY : SUBY A JOHN ROLL NO : 56

OVERALL CONTROL

TECHNIQUES

Control2

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.

Steps in Controlling3

Establish standards of performance.Measure actual performance.Compare the actual performance with

standardsTo find variations if any.To take corrective actions to avoid such

variations.

Techniques for overall control4

Financial Ratio AnalysisControl through Return on Investment(ROI)Management AuditSocial AuditHuman resource AccountingManagement Information System(MIS)

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#Financial ratio analysis

Ratio is an expression of relation between two figures or amounts.

Shows the relation between two variables to derive meaningful conclusions.

Definition6

Robert AnthonySimply one no. expressed in terms of another.

Metcalf and TitardA process of evaluating relationship b/w

component parts of financial statements to obtain a better understanding of firm’s position and performance.

Classification of ratios7

Liquidity RatiosAverage RatiosProfitability ratiosLiquidity ratios

Liquidity ratios8

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)

Shows the relation b/w current asset and current liability. Liquidity Ratio (acid test ratio)

Shows the relation b/w quick assets and current liability Absolute Liquidity Ratio (cash position ratio)

Obtained by dividing marketable securities

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Activity ratiosKnown 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

Investment made in inventory is efficiently used or not Receivable Turnover Ratio

Shows how promptly the organization is able to collect its dues Assets Turnover Ratio

Efficiency of assets for generating sales

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Leverage ratiosIndicates 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

Relationship b/w owners capital and borrowed fund Debt Total Capital Ratio

Proportion of debt to the total capital employed Interest Coverage Ratio

Interest burden borne in relation to its profit.

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Profitability RatiosShows 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

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#Management Audit

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.

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Management Auditor’s report

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.

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#Social AuditRefers 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

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Definition of Social Audit

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

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#Human Resource Accounting

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.

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Definition of HRA

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.”

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Methods of measuring HRA

Historical Cost MethodReplacement Cost MethodStandard Cost MethodPresent Value of Future Earnings

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Historical Cost Method

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.

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Replacement Cost Method

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.

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Standard Cost Method

Employees are categorized into different groups on basis of their hierarchical positions.

SC is fixed and value is calculated on tat basis

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Present Value of Future Earnings

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

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#Management Information System

Information is the life blood of the organization.Flow of information is done on regular basis through

information system like MISIts not a control techniqueIt helps in planning and other organizational processMIS 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.

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at a glance…

Steps in controlling Techniques of controlling Control

Financial Ratio Analysis 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…