CONTROL FUNCTION OF MANAGEMENT
The control function is a measure of performance in the business against the set objectives and goals of the firm. It analyzes where necessary changes need to be implemented within a company, pointing out financial differences using ratio analysis points(Griffin, 2007). These steps in broad include setting measures and standards, measuring the standards set, determining the performance levels, and finally making restorative moves. The ratios used in the financial statement of the control function help in managing the strengths and weaknesses of the firm.
By setting up ways to measure performance, one sets targets to achievable goals. The standards in the first step provide a set target for the firm’s intentions to follow. Then the actual measuring of the goals falls in place to examine the causes distinguishing the issue zones or notice designs that are working all the more proficiently. The third step brings about stability in the work process. With the information you’ve gathered and the data you have about execution, you can make any vital remedial move. Lastly, the fourth step can help prevent mismanagement decisions before it is too late and putting proper corrective actions(Cole, 2004).
Profitability ratios help clients of an entity budget reports decide the general adequacy of the board in regards to returns created on deals and ventures. The ratios measure the leadership levels. Activity ratios show the turnovers made by the company and the plausible rate of return expected. Liquidity ratios are used to assess the capacity of an organization to change over its existing resources into money and pay current commitments(Duhovnik, 2008).
Conclusively, the steps in the control function are used as ways to implement control in the business and as a feel safe factor through acting with the financial ratios which judge the capacity of an organization to raise capital and pay its commitments, which thus show the problem and provide a solution.
References.
Cole, G. A. (2004). Management Theory and Practice. Cengage Learning EMEA.
Duhovnik, M. (2008). Improvements of the cash-flow statement control function in financial reporting. Zbornik Radova Ekonomskog Fakulteta u Rijeci : Časopis Za Ekonomsku Teoriju i Praksu, 26(1), 123–150. Retrieved from https://hrcak.srce.hr/index.php?show=clanak&id_clanak_jezik=38596
Griffin, R. (2007). Fundamentals of Management. Cengage Learning.