Explain why the four steps involved in the controlling function are important. Why is a good understanding of the various ratios used by accountants and managers important to the controlling function? Give specific examples.
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Four steps in controlling functions are important because by doing this we are establishing the standards of the business.We have to set the standards to achieve our goals.Standards are measured in term of the output, in terms of loyalty, customer attractions, quality of goods. And these thing are very important for business progress.
For the progress of the business , the managers and accountants should have good knowledge of various ratios, few are as ...
(1)Net sales to working capital, it should be high as it tells how working capital is utilized.
(2)Net sale to Inventory..greater the turnover of inventory, higher the profit.
(3)Current ratio...this is the ratio of current asset to current liabilities and determine how good the financial position of the company.It should be high.
(4)Net profit to net sale...This should be high , this tells about the profit
So these are few whose good knowledge is a must to run the business efficiently.
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Nov 19th, 2015
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