Basically, all managers need to make a variety of decisions by planning and controlling their operations. Management planning is the process to ensure the short-term and long-term goals of the organization are reached.
Planning is a key for all activity levels of companies. A plan is a statement of intention, it does not guarantee that an event will actually happen. A plan communicates a company’s goals to coordinating the various functions, such as production and sales. The financial plans prepared by managerial accountants to specifies the resources needed for short-term and long-term goals achievement.
Control of organization is understanding what is actually happening in the operation and evaluating the performance of managers and their operations. Financial controls are controls over financial activity to ensure that financial systems are developed and implemented with due regard to generally accepted financial control standards, government business and systems strategic direction. There are several financial controls that are used to measure a management performance and determine how well an organization controls :
- Income Statement
Income statement is a financial report that shows an entity’s financial results (revenues and expenses ) over a specific period of time, generally a month, a quarter or a year.
- Balance Sheet
A balance sheet is a statement of the overall financial status of an organization at a fixed point in time which lays out the ending balances in a company’s asset, liability, and equity accounts as of the date stated on the report.
- Financial Audit
A financial audit is a verification of the financial statements of an organization.
- Ratio Analysis
Financial ratio analysis will improve your understanding of financial results and trends over time, and provide key indicators of organizational performance.
- Liquidity Ratios
Liquidity ratios analyze the cash levels of a company and the ability to turn other assets into cash to pay off liabilities and other current obligations.
- Profitability Ratios
Profitability ratios compare income statement accounts and categories to show a company’s ability to generate profits from their operations and how well companies can achieve profits from their operations.
- Debt Ratio
Debt ratio is a solvency ratio that measures a firm’s total liabilities as a percentage of its total assets and helps investors or creditors to analyze the overall debt burden on the company as well as the firm’s ability to pay off the debt in future.
- Operating Performance Ratio
Measure of profitability in relation to sales revenue, this ratio determines the net income earned on the sales revenue generated.
- Cash Flow Indicator Ratio
This ratio focuses on cash flow and how solvent, liquid, and viable the company is with their calculations and interpretation.
- Investment Valuation Ratio
Investment valuation ratios are used to estimate the attractiveness of a potential and existing investment to get an idea of its valuation. This ratio compare the relevant data to gain an estimate of valuation.
References :
Choi, Frederick D. S., Meek, Gary K. 2010. International Accounting. Edisi Keenam. Jakarta: Salemba Empat.
Financial Controls in Organizations http://study.com/academy/lesson/financial-controls-in-organizations.html
Financial Ratio Analysis http://www.demonstratingvalue.org/resources/financial-ratio-analysis
Jiambalvo, James. 2010. Managerial Accounting. Fourth Edition. John Wiley & Sons, Inc.
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