MANAGMNT 301 Chapter Notes - Chapter 16: Financial Statement, Transfer Pricing
Document Summary
Companies develop control systems in order to keep employees focused on achieving organizational goals. The basic bureaucratic control system includes setting performance standards, measuring performance, comparing performance standards, measuring performance, comparing performance to standard, and eliminating unfavorable deviations. Performance standards should cover issues such as quantity, quality, time, and cost. Budgets are a control mechanism that act as an initial guide for allocating resources and using funds. Many companies are changing how they prepare budgets, with activity-based costing, to eliminate waste and improve business processes. Balance sheets compare the value of company assets to the obligations the company owes to owners and creditors. Profit and loss statements show company income relative to costs incurred. Financial ratios provide goals for managers as well as standards against which to evaluate performance. Managers use variety of procedures to maximize the effectiveness of control systems. Market controls can be used at the level of the corporation, the business unit or department, and the individual.