Chapter 15 studyguide
Chapter 15 studyguide MGMT 340
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This 4 page Class Notes was uploaded by Vishal Gulati on Tuesday September 13, 2016. The Class Notes belongs to MGMT 340 at University of Illinois at Chicago taught by Peter B. Thompson in Fall 2016. Since its upload, it has received 9 views. For similar materials see Introduction to Organizations in Management at University of Illinois at Chicago.
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Date Created: 09/13/16
Chapter 15 151 The meaning of control ● Control is simply problem solving ● Organizational control is the systematic process through which managers regulate organizational activities to meet planned goals and standards of performance. 152a steps of feedback control ● feedback control model helps managers meet strategic goals by monitoring and regulating an organization’s activities and using feedback to determine whether performance meets established standards. ● Tracking such measure a customer service, product quality, or order accuracy ● Standards should be defined clearly and precisely ● ● ● ● ● ● ● ● ● ● ● Exhibit 15.1 diagnose the cause 152b The balanced Scorecard ● The balanced scorecard is a comprehensive management control system that balances traditional financial measures with operational measures relating to a company’s critical success factors. ○ 4 major perspectives: financial performance, customer service, internal business processes, and the organization’s capacity for learning and growth. ● 3 legs of the stool ● Exhibit of the stool ● Movie idiocracy people don't learn from mistakes ● If you don't satisfy all three.. Then you will fail ● potential for learning and growth ● As with all management systems, the balanced scorecard is not right for every organization in every situation ● Story about burnt toast: Customer doesn't like burnt toast so employee scrapes it out but next customer is the same so now the employee has to figure out why the toast was burnt. LEARN FROM YOUR MISTAKES ● Links targets and measurements to corporate strategy 15.3 Budgetary control ● Definition: Process of setting targets for an organization's expenditures, monitoring results and comparing them to the budget, and making changes as needed ● A responsibility center is defined as any organizational department or unit under the supervision of a single person who is responsible for its activity. 153 a expense budget ● An expense budget includes anticipated and actual expenses for each responsibility center and for the total organization ● expense budgets help identify the need for further investigation but do not substitute for it. 153b revenue budget ● A revenue budget lists forecasted and actual revenues ● venues below the budgeted amount signal a need to investigate the problem to see whether the organization can improve revenues. ● In contrast, revenues above budget would require determining whether the organization can obtain the necessary resources to meet the higherthanexpected demand for its products or services. 153c Cash budget ● The cash budget estimates receipts and expenditures of money ● If the cash budget shows that the firm has more cash than necessary to meet short term needs, the company can arrange to invest the excess to earn interest income. ● In contrast, if the cash budget shows a payroll expenditure of coming at the end of the week but only in the bank, the organization must borrow cash to meet the payroll. 153d capital budget ● Capital budget lists planned investments in major assets such as buildings, heavy machinery, or complex IT systems, often involving expenditures ● Like how UH is being repaired because it is different cash. 15e zerobased budget ● Is an approach to planning and decision making that requires a complete justification for every line item in a budget, instead of carrying forward a prior budget and applying a percentage change ● Between thompson and wife make 100000 and <80000> in expenses so 20000 ● Next year thompson and wife make 105000 and <84000> in expenses so 21000 ● Zero based is saying get rid of the and starting from scratch ● Top down budgeting ○ The budget amounts for the coming year are made by middle and lower level managers ● Bottom up budgeting ○ Lower level managers anticipate their departments’ resource needs and pass them up to top management approval Accounting terminology GAAP generally accepted accounting principles Profits and cash are not necessarily the same number Income statements money coming in, money coming out 154B Financial analysis: Interpreting the numbers ● A manager's needs to be able to evaluate financial reports that compare the organization's performance with earlier data on industry norms 15.5 ratios ● The liquidity ratio indicates an organization's ability to meet its current debt obligations ○ Current ratio = current assets/current liabilities ○ Quick ratio= (cash + accounts receivable)/ current liabilities ● Activity ratio measure internal performance ○ Inventory turnover = total sales/ average inventory ○ Conversion ratio= purchase orders/ customer inquiries ● Profitability ratios describes the firm's profits relative to a source of profits ○ Profit margin on sales= net income/ sales ○ Gross margin = gross income/ sales ● The balance sheet shows the firm’s financial position with respect to assets and liabilities at a specific point in time. ● The income statement summarizes the firm’s financial performance for a given time interval.